Blockchain and cryptocurrency – taking us all by storm

In my last blog on financial trends, I deferred the discussion on blockchain and cryptocurrency, as, I felt, it needs some elaborate explanation for those who are not intrinsically associated with the financial industry. These are two terms that have not only taken the world by storm but also created a lot of confusion as they break somewhat the barriers of our traditional mindset.

To start with blockchain, let me first clarify that the same term is commonly used in two distinctly different contexts—one is a technology, while the other is a cryptocurrency company. In this blog, I will briefly try to explain the technology.

IBM defines blockchain as ‘a shared, immutable ledger for recording transactions, tracking assets and building trust’. An?asset?can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.

All businesses run on information, hence the speed and accuracy with which we receive the information are extremely critical for the success of any business. This is where blockchain adds value. It is ideal for delivering that information because it provides immediate, shared and completely transparent information stored on an immutable ledger that can be accessed only by permissioned network members.?

In a blockchain, the ledgers are stored over distributed clusters of computers, where all participants have access to the information without having to store it separately, thereby eliminating any redundancy of data. Records stored are sacrosanct. No one can alter the data once it is stored. Even if the data stored is found to be incorrect, we have to store a fresh set of data and both will be visible at all points in time. This eliminates any chance of data manipulation. The third element of the blockchain is a ‘smart contract’. These are a set of rules which trigger automatic transactions, making the entire technology faster.

It is not difficult to understand why blockchain is getting adopted at such speed. Traditionally we had found that speed was the first aspect we sacrificed when we wanted to make the system more secure. But even with the compromise, there have always been regrettable incidents of security breaches. With blockchain, as non-members of the network are restricted from participation, we can be assured of the accuracy, but no compromise is made on the timeliness of the information. It is a big step towards the long-desired transparency and trust in information networks.

This section is the first part of a two-part blog that I have put together to explain the concepts. The next part will be on cryptocurrency.