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WHAT IS BLOCKCHAIN AND HOW WILL IT AFFECT ME?

Merriam Webster defines blockchain as a digital database containing information that can be simultaneously used and shared within a large decentralized, publicly accessible network including the technology to create such a database. It is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp of the transaction. By design, blockchain data cannot be modified. It is an open, distributed ledger that can record transactions between two parties efficiently in a verifiable and permanent way. Blockchains are either public, private or consortium. An ongoing debate is whether a private system with verifiers tasked and permissioned by a central authority is blockchain.

 

Blockchain was invented by Satoshi Nakamoto in 2008 for use in the cryptocurrency bitcoin, as its public transaction ledger. This inspired other applications such as recording of events, records management, identity management, risk management, transaction processing, smart contracts, tax collection, land conveyancing, documenting provenance, food traceability and voting. Blockchain 2.0 refers to new applications of the distributed blockchain database. They are generally peer-to-peer transactions, avoiding middlemen, enabling excluded people to enter the global economy, protect the privacy of participants, allow people to monetize their own information and provide the capability to ensure creators are compensated for their intellectual property. Block time is the average time it takes for the network to generate one extra block in the blockchain, some as frequently as every five seconds.  By storing data across its peer-to-peer network, blockchain eliminates the vulnerability of centrally held data. By decentralizing data on an accessible ledger, public blockchains make block-level data transparent to everyone involved. Transactions are broadcast to the network using software. The great advantage to an open, permissionless, public blockchain network is that guarding against bad actors is not required and no access control is needed. The primary use of blockchains today is as a distributed ledger for cryptocurrencies, most notably bitcoin.

 

Blockchain technology has a large potential to transform business operating models. It is more a foundational technology, creating new foundations for global and economic systems, than a disruptive technology. The use of blockchains promises to bring significant efficiencies to global supply chains, financial transactions, asset ledgers and decentralized social networking. Blockchains alleviate the need for a trust service provider resulting in less capital being tied up in disputes. They have the potential to reduce systematic risk and financial fraud. Blockchains automate processes that were previously time-consuming and done manually, such as the incorporation of businesses. As a distributed ledger, blockchain reduces the costs of verifying transactions. By removing the need for trusted third parties such as banks to complete transactions, the technology lowers the cost of networking. Blockchain smart contracts are contracts that can be partially or fully executed or enforced without human interaction while automating escrow. Some blockchain implementations could enable the coding of contracts that will execute when specified conditions are met.

 

The Bill & Melinda Gates Foundation plan to use blockchain technology to help the two billion people worldwide who lack bank accounts. The U.N.’s World Food Programme plan to make WFP’s growing cash-based transfer operations faster, cheaper and more secure. The Publiq author’s platform plan to use blockchain technology to guarantee authenticity of texts, avoid censorship and combat fake news. Tunisia and Senegal have implemented blockchain-based national digital currency. Sweden Land Registry is using blockchain to speed up land sale deals. The Republic of Georgia is piloting blockchain-based property registry. The government of India is fighting land fraud with blockchain. Russia is using blockchain to monitor the reliability of the Unified State Real Estate Register data in Moscow. The big four accounting firms are all testing private blockchains. Major portions of the financial industry are implementing distributed ledgers for use in banking to speed up back office settlement systems. The Swiss stock exchange is prototyping over-the-counter asset trading using blockchain. MasterCard is using blockchain to develop person-to-person and business-to-business payment systems. Visa, Unionpay and SWIFT are also developing blockchain technology. Blockchain technology can be used to create a permanent, public, transparent ledger system for compiling data on sales storing rights data by authenticating copyright registration and tracking digital use and payments to content creators such as wireless users or musicians. Kodak is launching a digital token system for photograph copyright recording. The insurance industry is using new distribution methods for peer-to-peer insurance, parametric insurance and microinsurance using blockchain. Online voting can use blockchain. Blockchains are being used for developing information systems for medical records. Blockchains are being developed for data storage, publishing texts and identifying the origin of digital art.

 

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