Nowadays, the online digital world is changing and evolving at rapid speed. First, there was the rise of the internet and digital revolution which changed or daily lives completely. This evolving of the online world will be continued with decentralization of the web. As a result, Blockchain technology is taking off and new opportunities will arise.
Blockchain & 4 Disrupting Opportunities From this new Technology
If you are a little up to date with development in technology and internet then you can’t have missed the introduction of Bitcoin and Blockchain technology. With every new technology being introduced this also brings interesting business opportunities. As a result of this, many government agencies and legal business are forced to research this new technology. In this article, I will explain the impact of Blockchain technology and what disrupting properties it carries.
What is Blockchain Technology
Blockchain allows digital information to be distributed but not copied, over the internet. In this case, it uses Bitcoin, a form of digital money, to be transferred over the online web. A blockchain uses blocks of data which are called a chain. These blocks are part of a distributed network of computers. The data is secured by cryptographic principles and are related to each other. When data is added to a block, a timestamp occurs and the record cannot be changed anymore.
This doesn’t sound very spectacular but still, this technology has some disrupting possibilities. First, it has no central owner and is thereby a democratic system. Second, it has transparency and the information added to the ledger can be seen by anyone who is interested in it.
Blockchain technology and transactions
A blockchain carries no transaction cost. The blockchain passes information from A to B in a fully automated and secure way. When a computer(called a node) wants to start using the network, it has to create a block first. This block will be distributed over the network and verified by the other nodes on the network. These nodes can be thousands even millions, it totally depends on the size of the total network. When a block is accepted by the network, it will be added to the chain.
Blocks of data
At this moment the total chain is updated with this new block of data. All the nodes over the network will immediately store this new chain on their hard disk. This is very crucial because this makes falsifying the chain almost impossible. The reason why is because now you have thousands or even millions of copies with this unique chain stored locally. This decentralized storage of data protects the safety of the chain and the total network. Bitcoin, the first Blockchain ever created, uses it to store digital transactions on the network but it can be used in many ways.
This sounds very promising and of course this decentralization could bring new opportunities but first I will start explaining the disrupting properties of Blockchain.
Property 1: Smart contracts
The first unique property of Blockchain is the smart contract. Below a short description of a smart contract:
A smart contract can be best described as a programmed contract whose agreements are recorded in computer code on the Blockchain. The contract is executed automatically without the need for (trust in) an intermediary. These agreements can always be viewed, but it is impossible to adjust them.
In other words, it’s a fully digital solution which exists out of software code and is programmable. This piece of software runs on a Blockchain network. As a result, this software runs automatically without the need for human interference.
Real world example of Smart Contract
John and Jerry want to start a bet on a football match. To safe transaction costs and fees from a match maker party they decide to do it on a Blockchain service. On forehand they both pay $10 dollar in cryptocurrency at the smart contract. The match is about Real Madrid vs Barcelona. John wants to bet on Barcelona and Jerry wants to bet on Real. A very simple coding solution will be given to the contract which states: If Barcelona wins John gets a total of $20, if Real Madrid wins then Jerry gets a total of $20. A draw should give both players $10 back.
When the match finally ends, the Blockchain network will immediately validate the code, check the results and payout cryptocurrency to the participants. This brings new opportunity, because there is no human interference!
Property 2: Digital currency
The next famous property of Blockchain is cryptocurrency. Every Blockchain solution out there has its own token our cryptocurrency. Bitcoin, the first Blockchain network ever created, uses BTC as cryptocurrency for financial transactions.
Cryptocurrency can be seen as a tool or resource on a Blockchain network. Anything related with buying, selling, investing, trading, micro tipping, or other monetary aspects will be handled by Blockchain native token.
This token or cryptocurrency is a 100% digital and formed on the basis of cryptography, or by definition, “the art of solving or writing codes.” Although all are considered cryptocurrencies, these tokens can serve different purposes on these networks. In other words, there is a slightly difference between a cryptocurrency and digital tokens.
Referring to the token as the technology can be right in the case of Bitcoin, but is very different when dealing with other Blockchain projects like Ethereum. In this case, the technology is known as Ethereum, but the native token is Ether, and transactions are paid in gas.
Property 3: Securities
Currently, the traditional financial world uses securities to handle financial contracts. Most of these securities are closely tied to government bonds and stocks. With the introduction of Blockchain technology it also opens the gate for new opportunities in digital securities. So what are securities all about?
A security, in a financial context, is a certificate or other financial instrument that has monetary value and can be traded. Securities are generally classified as either equity securities, such as stocks and debt securities, such as bonds and debentures.
One of the main issues with financial securities today is that they are only accessible for a very select public. As a result, mostly stock traders on Wallstreet or employees of legal firms have access to these markets. Security tokens on a Blockchain would change this and make it accessible to a much wider audience. But there is more.
Securities and Blockchain Opportunities
Firstly, Blockchain token technology is similar to a protocol on the online web and therefore it creates a very efficient infrastructure which is global. Automation of digital contracts can be done in a very effective way.
Secondly, a Blockchain transaction can be tracked and traced, because of its open property. As a result, ownership of digital securities can be changed instantly and at zero costs. This ‘out-of-the box’ transfer and change of ownership is one of the most challenging opportunities.
Property 4: Record keeping
Keeping digital records safe and traceable in a decentralized way is also one of the new opportunities Blockchain technology brings. A Blockchain network can be seen as multiple databases which stores transactions as records. This storing of records isn’t revolutionary and it’s been used by all computer systems in the world.
The main difference of Blockchain technology is its decentralized manner. A Blockchain distributed network stores the exact same copy of its database on every node in the network. As a result of this, it’s almost impossible to hack data or manipulate it by an ‘evil third party’. In other words, all data on the Blockchain is immutable and can only be changed by its legal owner.
Record keeping: An example
Suppose you want to buy a property in Chicago and let the transaction run on the Blockchain. All records on the Blockchain are safe and immutable. As a result, you and the owner of the property make a smart contract which handles the deal. For buying this property $200 000 in Bitcoin(or any other token) is requested. To continue with the deal you send $200000 in BTC to a smart contract on the Blockchain. After this transaction, the owner of the property signs a document which gives ownership of the house to you. Next, to verify this deal and transaction, you sign the ownership document and the smart contract stores it on Blockchain.
To summarize, no trusted third party is needed to secure and sign an ownership document. Also, no financial institution is involved to handle the transaction. As the Blockchain is safe and secure, it’s also possible now for everybody on the network to track the transaction and see that you are the brand new owner of a house in Chicago!
Although this brand new Blockchain technology is still in its infancy, the online digital world is already starting to adopt this technology. In the past few years, many ICO’s and Blockchain projects made birth, and introduced their own digital token. Bitcoin, which is the oldest and most secure Blockchain network in the world, is growing very fast and is bringing new opportunities to the financial markets.
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