Why Blockchain Matters Part 3

Bob Pattni, Crypto Advisor on: ‘Why Blockchain Matters’

Part 3

There are multiple precedents throughout history, where technology has and will continue to transfer power and control from central authorities and distribute them to the masses. For example, time used to be determined and communicated by large clock towers that were expensive to build and maintain – until the advent of pocket watches, which became digital watches etc. A more obvious modern example is WhatsApp, which massively cut the transaction cost of sending messages globally to its users – and also dramatically cut profits for the carriers. The central authority (phone carriers) lost to the application (WhatsApp) built on a decentralized network (The Internet). In fact, it’s the example of WhatsApp that’s probably the most obvious example to use when talking about The Blockchain as it’s almost an identical comparison.

Third parties that currently verify transactions (the central authority) stand to lose against The Blockchain (the decentralized network). As such, The Blockchain effectively cuts out these third-party transaction verifiers: auditors, legal services, payment processors, brokerages and other similar organizations.

Now let’s look at how The Blockchain works away from the world of Bitcoin, because while you may not be convinced that exchanging Bitcoin is an invaluable service, there are many other examples of value transfer that are critical – and currently very slow and expensive. Consider the exchange of property: numerous intermediaries are currently involved in this process and that’s not the only potential use of The Blockchain either.

The case of The Blockchain enabling a decentralized currency exchange – such as Bitcoin – is well defined and will likely be the dominant user for some time to come, however there are a multitude of innovative users now beginning to make use of The Blockchain technology. Companies are already building their own Blockchains for various applications and this will continue.

At its core, The Blockchain is a foundational technology, like TCP/IP, which enables the Internet. And much like the Internet in the late 1990s, we don’t know exactly how the Blockchain will evolve, but evolve it will and its likely to be a massive influencer on our world in the future.

Similar to the Internet, the Blockchain must be allowed to grow unencumbered and uninhibited by Governments or Central Authorities. This will require careful handling that recognizes the difference between the platform and the applications that run on it – for example, TCP/IP empowers numerous financial applications that are regulated, but TCP/IP itself is not regulated as a financial instrument. The Blockchain should receive similar consideration and it’s a priority that this is clarified and resolved soon. Had we over-regulated the Internet early on, we would have missed out on many innovations that we can’t imagine living without today. The same is true for the Blockchain. It’s likely that innovations in the Blockchain will outpace policy, and it’s vital we don’t do anything to disrupt the growth and development of this vital new technological advance.

Written By Bob Pattni

Why Blockchain Matters Part 1

Bob Pattni, Crypto Advisor on: ‘Why Blockchain Matters’

Part 1

By now, we’re all pretty well aware of Digital Currencies, and in particular the main type and indeed the original Digital Currency, Bitcoin. Bitcoin is an application that runs on The Blockchain, and for the purpose of this blog I’m going to concentrate on examining The Blockchain to show you how it works and why it’s considered to be the most important technological advance since the Internet itself.

Describing Blockchain to your everyday ‘man on the street’ is actually pretty simple. Imagine a secure transaction ledger database that is shared by all parties participating in an established, distributed network of computers. This ledger records (and stores permanently, as no transaction can ever be deleted from The Blockchain) every transaction that occurs in the network, essentially eliminating the need for “trusted” third parties such as payment processors. Blockchain proponents have gone on the record to describe the innovation as a “transfer of trust in a trustless world;” referring to the fact that the entities participating in a transaction are not necessarily known to each other, yet they exchange value with surety because of The Blockchain. For this reason, The Blockchain is an absolute game changer.

IBM’s book on Blockchain states that there are four key attributes in a blockchain network:

Consensus: For a transaction to be valid, all participants must agree on its validity.

Provenance: Participants know where the asset came from and how the ownership has changed over time.

Immutability: No participant can tamper with a transaction after it’s been recorded to the ledger. If a transaction is in error, a new transaction must be used to reverse the error, and both transactions are visible.

Finality: A single, shared ledger provides one place to go to determine the ownership of an asset or the completion of a transaction.

These unique characteristics are revolutionary because they allow individuals and/or organisations participating in Blockchain transactions to have a high level of transparency. Another advantage of The Blockchain technology is that there are likely to be significant financial savings to the main parties conducting the transactions due to less oversight, reduction of intermediaries, and an elimination of the duplication of effort because all participants have access to the ledger.

Continue reading with Part 2

Written By Bob Pattni