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A lot of people have heard of Bitcoin. Fewer have heard of the technology that underpins Bitcoin, blockchain, which has the potential to revolutionize industries. While many use the terms Bitcoin and blockchain interchangeably, they are in fact not the same. Bitcoin is a digital currency, the first of its kind, and blockchain is the technology that enables the existence of cryptocurrency (among other things).
To oversimplify, blockchain is a distributed ledger. Imagine a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet, meaning that you have a shared record of all transactions, thereby creating a unique digital signature. This is what we call a block. Once each block is completed it’s then added to the chain—a chain of blocks also known as a blockchain.
Blockchain can enable institutions to work together in a faster, more secure way in transferring a range of assets, but does that mean you need to go out and invest in Bitcoin or any other cryptocurrency? The answer is no, but if we look back at the history of money, some may recall that when the banks first found out about the internet they didn’t understand it so they dismissed it.
I recently wrote that blockchain is a shared, distributed ledger, is a record of all transactions made in a network. Crucially, this ledger can be viewed by all participants and no single party has control over the information as a whole. To update the blockchain with a new block, you need all the participants in the network to validate the newly added block. The result is a secure, traceable and tamper-proof system for the transfer of anything valuable – be it money, securities or intellectual property. This is a secure, traceable and tamper-proof system for anything valuable: be it money, property, shares, or intellectual property.
Gone are the days when an entrepreneur wanted to transfer property in a business they had to spend a fortune in developing the necessary network of people. With blockchain, the entrepreneur can now bypass the big guys and have all of the minority shareholders, which could be a number into the hundreds, simply send money online to buy more shares. This could revolutionize the process of buying and adding shares in many different businesses because it will now be done at a fraction of the cost in a much shorter amount of time. This is the kind of innovation that only this new kind of technology can provide. This is definitely a monumental step forward for transactions that require numerous people all throughout the investment process because in the time before blockchain, to track down each and every investor was no small feat.
The age of the blockchain has only just begun, but in the future, the current trading of assets could become obsolete, replaced by newer methods that involve faster, more efficient, and more liquid cross-border trading. The odds of launching an IPO on the NYSE could drastically be reduced.
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“Link to the original”: https://www.youtube.com/watch?v=4exaI4CGSVI. Accessed on March 02, 2020.
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