In the second part of this series we explain the critical differences between blockchain and cryptocurrencies. Blockchain is an extremely secure, immutable and almost incorruptible robust distributed ledger that records virtually any value transaction.
Believe it or not, blockchain started life back in the early nineties. It later gained full maturity as the underlying core component of the digital currency Bitcoin to solve the problem of digital currency “double spend” without the need for a “trusted” intermediary (eg a bank). It is important to note that this distributed ledger can exist in two forms, public (or permissionless) and private (or permissioned.
Bitcoin uses a Public Blockchain; this means all transactions may be viewed by anyone conducting transactions. Of note, however, is that while you may see all transactions, you are not privy to who (eg the name of the person or entity) is doing the transaction. This is where the security and anonymity embedded in blockchain technology comes into play.
Private Blockchains have the same securities as Public Blockchains, with additional access controls that determine who can access the private blockchain network. The owner of that network usually controls access.
Blockchain technology has so many uses far beyond just cryptocurrency. Its capabilities extend to insurance, health care, intellectual property and digital rights, identity management, cybersecurity, titles and registration, remittances, wagers and betting, voting and e-commerce.
Because of its intrinsic design, perhaps one of the blockchain’s most significant benefits is its inherent transparency and ability to mitigate corruption while promoting inclusiveness. It is these attributes that make blockchain such an appealing technology outside of the financial markets. Blockchain creates TRUST and VALUE by being a trustless technology, while at the same time removing components of no value.
Pros and Cons of Blockchain
Blockchain has some clear advantages and disadvantages.
Pros: efficiency, immutability, transparency, corruption mitigation, lower transaction time and costs.
Cons: It still has scalability and power consumption issues, immutability has some drawbacks, rare instances where security can be compromised, and speculative market creation.
The positive thing about blockchain is that so many entities have recognised its potential. It enjoys a lot of support from reputable entities in the technology space and the financial services space. Next week, in the final article of this series, we will explain cryptocurrencies.
Trevor Forrest is CEO of 876 Solutions and a certified blockchain architect with over 29 years of experience in the IT Industry in Jamaica and overseas.