I love how blockchain has quickly become something that applies to lots of different things; from blockchain applications for Airbnb to loyalty rewards to solar panels. Blockchain is quickly becoming one of those buzzwords, so it was good to get some clarification in a recent episode of the “Breaking Banks” podcast.
Blockchain started as a peer-to-peer electronic cash system, enabling anyone in the possession of Bitcoins to pay without the need for a middle man but has quickly become a way to enable a much wider range of transactions. From listening to the experts on the aforementioned podcast episode, I learnt more about the essentials behind Blockchain technology:
- Infrastructure or operating system – Blockchain technology effectively acts as the operating system or infrastructure to keep a Bitcoin or any other digital asset secure. Ethereum, created by twenty year old Vitalik Buterin, is a good example of a Blockchain technology platform.
- Shared ledger as proof of transactions without middlemen – Blockchain isn’t necessarily a consumer-facing technology. However, it does enable transactions between consumers. For example, there are plenty of private blockchains that provide a ledger of transactions to keep Bitcoin secure, allowing users to agree on who owns how many bitcoins. Each new block requires a record of recent transactions along with a string of letters and numbers, known as a hash, which is based on the previous block and produced using a cryptographic algorithm.
- Technologically binding smart contracts around digital assets – In the above mentioned episode of the “Breaking Banks” podcast, Bart Stevens and Brock Pierce from Blockchain Capital, a VC that invests in Blockchain enabled companies, talked about the future about how blockchains power ‘smart contracts’ between two parties. Consumers won’t have to worry about the underlying Blockchain technology, but just use the service that has been built on top of it. Abra, a digital wallet and remittance service, is a good example in this respect.
- Digital identity management – Digital identities is another key thing to think about in relation to Blockchain and the transactions it facilitates. David Birch, a UK based FinTech and digital identity guru, makes the case that Blockchains are all about managing and protecting digital identities. Especially as Blockchain technology starts getting combined with the Internet of Things, digital identity management will be a critical thing going forward.
Main learning point: I feel there’s a lot more to learn about blockchain technology, but the main thing I’ve picked up sofar is the way in which blockchains will make it easier and more transparent for people to transact.
Validating transactions in the Blockchain – Taken from: http://www.tfreview.com/blog/what-blockchain-technology
Related links for further learning: