With 2017 seeing the meteoric rise in Bit Coin prices, most have been left wondering how a virtual entity caused such a storm. Those who found themselves in the eye of the storm, those with the foresight to invest in crypto currency when it was founded are sitting on top of fortunes. The world has already seen its first billionaires who came about their wealth investing in crypto currencies. Although the ebb and flow of the crypto currency seems very much like a standard stock market, the magic happens inside what is called a blockchain. This is a list of ten facts (and myths) about blockchains, to help grasp the gravity of this new phenomena which can potentially change the not so far future in drastic ways.
- THE BLOCKCHAIN DEFINED
A blockchain is a long chain of data entries. No rocket science involved here. The catch over here is that not one person or organization for that matter is in charge of the blockchain. Each record is known as a block. When a person adds a block every person who has ever added a block on the chain is informed. This makes the whole process extremely transparent and there are no intermediaries involved.
- THE BLOCKCHAIN IN WORKING
Once a transaction is agreed upon between parties, everyone on that particular blockchain is informed. When the information is validated, it is added as a block on the chain. Every time a block is added it gets a reference on which is the information about what blocks were added to the chain before it. This makes it extremely difficult for anyone to alter the information.
- THE BLOCKCHAIN IS SAFE
The system on which crypto currencies work which is the blockchian, is extremely. With this level of transparency and not one person responsible for the book keeping it is very difficult to corrupt everyone involved. The block chain technology is very rock solid compared to other safety nets involving internet.
- THE BLOCKCHAIN IS DECENTRALIZED
Although this aspect has already been mentioned above, this is what makes the blockchains potentially the future of all future transactions. Since everyone is immediately informed about changes on the chain, there is no single weakness in the system that hackers can attack or manipulate.
- CRYPTOCURRENCIES HAVE BEEN STOLEN BEFORE
In all fairness, it is imperative to mention that bitcoins CAN be stolen. The infamous heist of Mt Gox is what many still remember in this context. Mt Gox which is located in Japan was a massive exchange of bitcoins and at its peak could handle up to eighty percent of transactions all over the world. The heist did not involve any weapons. An auditor inside the facility artificially altered the values of about 2000 bitcoins to one cent ad then sold them. The heist took away around six percent of all bitcoins in existence, which as of October 2017 valued around $3 billion. This does not in fact down play the merits of the blockchain. The blockchains were not altered, instead the system entertaining these blockchains were weak and easily manipulated and hence it made the heist possible.
- THE BLOCKCHAIN SYSTEM IS GROWING
More than ninety percent of the banks in North America and Europe are exploring blockchains as an alternate to the growing security issues in banking transactions. Globally, the blockchain market is expected to grow exponentially and by 2024 the forecasts show that it will be worth around $20 billion.
- THERE ARE PUBLIC AND PRIVATE BLOCKCHAINS
Photo by David McBee
The general construct of this discussion may have led to the belief that there is only one blockchain in existence. This is not true. Another misconception that may have been formed is that every person has access to every blockchain in existence. This is not true. Blockchians can be public or private. The public blockchians follow the set rules which have been discussed before. The private ones however have a slightly different set of rules. Basically, the person who creates the blockchain is allowed to give access privileges to anyone they wish. Also they may also decide when to add a block to the chain. This may seem unfair but since everyone enters block chain willingly it is still safe compared to other systems.
There are also consortium blockchains. Power does not lie with any one person on a consortium blockchain. Instead, all participants have complete information to the transactions being done on the blockchain.
- THERE ARE NO INTERMEDIARIES
When two parties agree to a transaction, it is done instantly. Now modern banking solutions also boast their own fast processes. The trouble over here is that, banking in itself is a service provided by a third party. This means that for each transaction, a small amount of money is charged by whoever is facilitating the process which are banks or other money transfer services. Blockchains make it easy to prove ownership of an asset. The transactions are authentic and are almost impossible to forge.
- BLOCKCHAINS ENABLE SMART CONTRACTS
A smart contract is an protocol which is set into motion once the requirements have been fulfilled. This ensured that the terms of the contract have been fulfilled by both parties. A good example of this would be downloading of a software once the payment has been made. However is important that the contract has been fulfilled before any further action is taken.
- BLOCKCHAINS HAVE FUNCTIONALITY BEYOND JUST CURENCY
Though often mentioned in the same discussion, bitcoins and blockchains are not the same thing. Bitcoin is a crypto currency, while blockchain is the tool that makes virtual currency viable. Bitcoins may be the best example of a blockchain at work but there are several other uses for it. For example, blockchain allows musicians to get paid directly when consumers buy or listen to a song. The purchasing platforms can be cut out of the process, which also means they don’t take a cut of the revenue. Musicians benefit both financially and from a more direct relationship with their fans.
The ten aspects of the blockchain technology highlight its utility in and prove that it is in fact a thing of the future instead of just a foot note in the progress of banking and finances.
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