Block Chain Simplified
A simplified explanation of the block chain system and its inclusion in corporate America
If you have been keeping an eye on the advancements in the field of finance and new emerging technologies, it is likely that you have heard the term “block chain”, the revolutionary new ledger system behind Bitcoin. Evaluated at $708 million in 2017, the block chain technology industry is anticipated to reach $60.7 billion by the year 2024, making it one of the fastest growing new generation industries/technologies. Although those stats are impressive, block chain technology is still relatively new. Information surrounding it may be thought of as complex or difficult to understand. However, today I will be explaining to you the intricacies of block chain in a more conventional and simplified manner while also going over its inclusion in corporate America.
The block chain system serves as a decentralized ledger. In regards to the transfer of money, this ledger records the movement of the money. In regards to a ballot and votes, it is used to record which candidate the votes are put in for. In regards to patient records, a digital medical history can be stored. However, what makes block chain more than just a storage system or bank, is its decentralized nature. The information presented on this digital ledger is recorded across many computers. This makes it so that any record (block) cannot be altered retroactively, without the alteration of all subsequent blocks that make up the ledger or the “chain”. Strong encryption algorithms also ensure that no transaction can be altered once complete, making block chain an amazing securer of information.
These blocks, as mentioned earlier, serve as stored data. The first of these blocks is referred to as the genesis block, this is where the block chain begins. The information presented in the subsequent blocks typically hold transaction or action details, such as the time, date, or amount of money, the participants in the transaction through a unique digital signature, and a method of distinguishing between an individual block from other blocks in the chain. This information is expressed in a piece of code called the hash.
As for the transfer of money, blockchain clearly sets itself apart from current money transfer methods. By eliminating the middle man, which is normally a bank or some other third party, the blockchain system serves as a simplistic and safe platform on which money and information can be exchanged between two parties. Furthermore, with today’s standard banking structure, settling, validating, and completing transactions is a long process, sometimes taking days, slowing cash flow from point A to B. Block chain’s instantaneous setup transfers information and money in real time, completely removing this hassle. The encryption and automation, as mentioned earlier, also makes the blockchain system an extremely secure method on which proceedings such as, the transfer of money, can be conducted. Along with this, the absence of middle man completely removes any transactional fees, including international fees, making block chain a more economically sound approach to transferring money and information.
Despite the level of innovation block chain brings to the table, in many cases, corporate America is still reluctant to give block chain a chance to prove itself. This is because of one potential issue, scalability. Organizations are not willing to use block chain unless it can prove that it can scale itself to an appropriate level without undermining speed and security. Along with this, many organizations at this time, simply do not need a technology that acts as a decentralized ledger, despite its ability to easily transfer money and ideas. Even if companies do decide to make the switch to the block chain system, by completely removing existing infrastructure and starting anew with a customizable blockchain, doing so would be an exceptionally costly and time-consuming process which many organizations simply cannot commit to.
Finally, the presence of hackers also serves as a prominent threat for organizations. Although block chain is known for being encrypted and almost impossible to hack, it is still possible. In early January of 2019, the security team at Coinbase, a cryptocurrency brokerage, noticed that within their block chain system, the history transactions had been hacked. The hacker had somehow gained control of more than half of the system’s computing power. This power was used to rewrite the system’s transaction history. This unfortunately made it possible for the attacker to spend one cryptocurrency twice, which is known as “double spend”. This caused a loss of around $200,000. On a larger scale the damages could have been tenfold, bringing block chain’s encryption and security into question.
In the end, the possible applications are endless. From crowd funding with smart contracts to stock trading by eliminating the need for stock brokerages, block chain can truly revolutionize the future of conducting transactions and sharing information. However, while blockchain technology has for long been praised for the level of security it entails, under certain conditions it can be quite vulnerable. As the numbers of block chain systems around the world grow, day-by-day and year-by-year, we will continue to learn more and more about this technology of the future, that be it, sometimes the hard way.
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