A blockchain is a distributed database that keeps a continuously growing list of records protected from revision and tampering through it’s cryptography and distribution. Basically, blockchain technology is a public ledger that records all transactions that have ever occurred. The public blockchain lets any person see these transactions in real time and evaluate the basic stats of the system, such as the time between blocks, the number of blocks made, mining costs, the cost per transaction, and most fascinatingly even the electricity used to mine bitcoins. The decentralized technology gets rid of middlemen as opposed to other centralized systems.

The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta. In 1992, Bayer, Haber, and Stornetta incorporated Merkle trees to the design, which improved its efficiency by allowing several documents to be collected into one block. The first blockchain was conceptualized by an anonymous person or group known as Satoshi Nakamoto in 2008 (some speculate it could even have been an AI creation). Satoshi’s work outlines in detail how to make a completely novel cryptocurrency based on a sophisticated mathematical formula and a resilient distributed architecture.

Satoshi’s publication described how Bitcoin can be used to send payments between two willing entities without requiring a third-party financial body. Each transaction was stored in the blockchain ledger, the latest block linked to the preceding ones using a digital signature. To make sure there is trust in the ledger, the network participants ran complex algorithms to authenticate those signatures and add transactions to the blockchain. By 2014, over 80 uses of such cryptoledgers had been documented. In the same year, about eight funded projects were underway to develop blockchain 2.0 technologies. In 2016, the central securities depository of the Russian Federation announced a pilot project centered on blockchain technology. Many regulatory agencies in the music industry are testing models that use blockchain technology for management of copyrights and royalty collection around the world.

Blockhhain Decentralization

Although blockchain is mostly known to back cryptocurrencies like Bitcoin or Ether, this technology has much more uses and potential. Literally, blockchain is the first decentralized and transparent public ledger of records. As a decentralized  technology, no single person, institution, or machine is telling others what to do in blockchain technology. Ethereum is an example of a decentralized currency, due to the fact that money is no longer printed and given value by an institution, but rather created and given value by the community using it. In IT related terms, this means there is no specific machine needed for it to work. In a centralized system, a single authority is controlling, directing, and making decisions. An example is the U.S. Dollar which was printed by the U.S. Mint with the permission of the U.S. Congress. This is declaring that the U.S. Dollar is backed by the government and can therefore be trusted by anyone underneath the government. If the U.S. government disappears, so does the U.S. Dollar. And other problems insue fiat currencies.  

Despite the decentralization of blockchain technology, the Bank of Canada isn’t keen on a blockchain-based interbank payments system. Canada’s central bank has claimed a stand-alone wholesale blockchain system is ‘unlikely’ to match the net benefits of a centralized system after testing its digital currency CAD-Coin, developed in collaboration with blockchain startup R3. Despite notable progress made in blockchain innovation, the report revealed that there are many hurdles left in underpinning blockchain or distributed ledger technology (DLT) for an interbank payments system.

In contrast, other central banks and nationwide banking groups conducting blockchain experiments have seen successful results. The most common example is that of Singapore, where the country’s central bank completed its own blockchain interbank payments pilot successfully and is pressing ahead with plans to conduct cross-border payments using its internally-developed digital currency. The Japanese Banking Association (JBA), the body that represents all banks with a presence in Japan, is to test money transfers over a blockchain using digital currencies. The JBA is also the operator of the country’s payments platform and is looking at uprooting its existing framework to replace it with blockchain technology. Based on such applications and much more, it would seem that there are myriads of advantages of using decentralized blockchains.

Fraud Prevention

Because blockchains are open-sourced ledgers, and since every single transaction is recorded on them, it’s very easy to tell if fraud is taking place. The integrity of blockchain systems is monitored and maintained by miners who validate transactions all day every day. There are thousands of miners validating blockchain transactions all around the world at any given moment in time. This gives decentralized blockchain-based cryptocurrencies an enormous amount of oversight and makes them nearly invulnerable to fraud. This is in an enormous benefit of decentralized blockchains.

Protection From Government Meddling

Blockchain-based cryptocurrencies are not controlled by any government, bank, or central bank. This means that they cannot be meddled with by governments, at least not in any apparent way, on a fundamental level. Government meddling is a problem that has led to the devaluation of many currencies throughout history. From the Denarius in the Roman empire, to the German Mark in Weimar Germany, to the Zimbabwean Dollar in recent times, bad things can happen to currencies if governments meddle too much with them.

Faster Transaction Times

Blockchain-based cryptocurrencies provide transaction times that are often faster than bank transactions. For some bank transactions, such as wire transfers, it can take days for the transaction to go through. However, transactions made on a blockchain usually take just minutes, if not faster. The fact that transactions can be made faster through blockchain-based cryptocurrencies is potentially beneficial for countless individuals and businesses around the world.

Increased Financial Efficiency

Decentralized blockchains allow transactions to be made directly from person to person without the assistance of a third-party. This dramatically improves financial efficiency and allows people to be less reliant on banks and other financial institutions. This can save a lot of people from fees and other costs associated with using banks. This feature of blockchain technology is very appealing to many people who wish to save money.

Effective Store Of Value

Bitcoin, which runs on the blockchain, is often referred to as “digital gold”. This is because of its extremely high price. It also shares some characteristics associated with gold, such as the fact that there’s a finite amount of it, it has to be mined, it’s desirable in many different countries, etc. Because of its qualities and the fact that it’s known as “digital gold,” Bitcoin (and also blockchain technology in general), can be a very effective way to store value. Many people have realized this, and that’s part of the reason why the price of Bitcoin recently reached nearly $20,000 per unit (it did hit that in some exchanges), and it’s still climbing. Also, Bitcoin and other blockchain-based currencies have one major advantage over gold and other precious metals as a store of value: they can be stored on computers or mobile devices and sent over the internet. This means that people do not need to buy safes or security deposit boxes at banks to store their wealth like they often do with gold. There are of course some disadvantages with digital currencies as well, and some very desirable features in precious metals.

As a revolutionary tech, blockchain technology will likely create an asset class (cryptocurrencies) that will rival precious metals as a commodity.  It is an incredibly creative and useful invention. Its creation required incredible computer science and finance skills, and blockchain has the potential to disrupt both of these industries. Some major businesses, such as overstock.com and Tesla have begun accepting blockchain-based cryptocurrencies for payment. DinarDirham’s DinarCoin, as well as their Gold Smart Contracts, and the Blockchain.My wallet app are all possible because of blockchain technology.