Blockchain is a distributed ledger of transactions that is formed of blocks linked together chronologically.
Innovation is perhaps the foundation of any technological disruption, and the best of the innovations are those which can alter, reshape, or disrupt the world as we know it. One such revolutionary innovation that has caught the world like a storm is blockchain technology. While the ripples for the blockchain tech started with the disruptive rise of crypto-currencies, and in particular bitcoin, the underlying technology itself is going to seep into a broad range of industries.
Sirish Kumar, Founder and CEO, Telr feels that global leaders, startups, innovators and thinkers have begun using blockchain for not only solving real-world problems, and expediting processes. This is particularly the case in the fintech space, where blockchain is viewed as having the potential to provide massive disruption, in overhauling the existing status quo.
Understanding blockchain technology
Simply put, blockchain is a distributed ledger of transactions that is formed of blocks linked together chronologically. Each of these blocks contains data relating to the most recent transaction, and is hashed for the reference of the previous block. The hashed reference, so to speak, creates linkages between different blocks of the chain. As no single entity owns the entire blockchain, nobody is able to corrupt it. This aspect is what lends a mysterious appeal of a blockchain ledger – but also democratises it. While the technology can quickly process transactions and store data of consequence, it doesn’t rely on any sort of governance or regulation from a central authority.
These key components of a blockchain help shine a light on why it is so significant, and such a shift from the world of today, where data tends to be held and controlled centrally:
Cryptography – transactions are recorded and stored via the means of cryptography, which allows different parties and participants to transact, without warranting an external party to provide any oversight.
Decentralised – there is no room for manipulation in blockchain, since every transaction is totally decentralised and time stamped. It follows that no single entity or regulatory body has control over blockchain transactions.
Consensus – blockchain follows different consensus mechanisms in order to facilitate an uninterrupted flow of transactions. The chain is only able to branch out after agreement or consensus between different nodes.
P2P network – blockchain is quintessentially a P2P network with the processing responsibilities and data being shared between all the computers.
Distributed ledger – fundamentally an asset database, a distributed ledger can be shared, can be maintained cryptographically, and is immune to changes via unauthorised sources.
Why is blockchain the future?
Blockchain technology is experiencing a lot of exploratory activity, and a major chunk of this comes from the payments and the fintech space – and with good reason. Here’s a couple of examples of why blockchain presents unique opportunities in this area:
Blockchain has the potential to expedite transactions across borders. In fact, a payment gateway built on the foundation of blockchain can process cross-border payments within 15 to 20 seconds: a significant development when compared with banking channels that may require several business days. Imagine, for example, a business that provides data centre services in more than 20 countries. It needs a way to receive money – in multiple currencies – from its customers, after which it can pay its vendors, within 1 day, in different countries. This sort of a challenge with international businesses needs to be addressed, and blockchain will help them with this, and thereby to scale globally.
Leveraging on blockchain’s inbuilt immunity to counterfeiting, hacking, external manipulation etc., it’s possible to establish synergies between blockchain technology and machine learning, and identify fraudulent behaviour before it’s able to have a negative impact.
Given its disruptive potential, it’s little surprise that blockchain has caught the interest of a number of different government bodies, across the globe.
For instance, the government of the United Kingdom is currently developing a blockchain-based system to process payments for those claiming health benefits. The Russian government is creating its own national system for blockchain, known as Ethereum Russia. In addition to securing payments, blockchain is also being looked at for creating secured databases. Authorities in Australia, for example, are exploring different ways of initiating a blockchain-based database which would replace its other databases of passports and birth certificates.
On the commercial side, IBM is exploring the potential of blockchain for initiating more authentic, transparent, and trustworthy supply chains for food. The tech giant has been collaborating with food and packaged goods companies, such as Walmart, Tyson and Nestle.
The future outlook
The gestation period for blockchain is over, and its market matures further with every passing day. In fact, as per the estimates, the market for the blockchain distributed ledger across the globe is going to reach USD 5.430 billion by 2023.
Businesses can no longer sit in silos; rather, success will belong to the enterprises and startups that are best able to draw out the potential of this innovative technology, joining the dots and applying blockchain to scenarios and processes across verticals.