Blockchain Technology Will Outlive Bitcoin Upheavals
Many people think bitcoin and Blockchain technology to be two sides of the same coin. Bitcoin is a worldwide cryptocurrency and digital payment system. It is not issued or controlled by any central bank or financial institution. It is mostly stored in electronic format and in theory, anyone with sufficient computing power can create(mine) it. But the mining involves complex algorithms which are based on generating the next block in the chain of blocks called Blockchain where blocks store some information. Despite their financial roots, the two concepts were brought to public notice together by a group of programmers under the name, Satoshi Nakamoto in 2009.
Being a currency, bitcoin can be used to buy goods and services and like any other currency its value can fluctuate against other currencies e.g. USD. Value of 1 bitcoin has increased from less than $600 on 01-Sep-16 to above $4900 in years’ time. The number of transactions have increased 10 times in the last 5 years though they have remained the same for the last 1 year. Currencies markets are wholesale markets and experience less volatility than equity or commodity markets. This gravity defying ascent coupled with no central control has made the central banks nervous about bitcoins. Later,Chinese authorities clamped down on bitcoin exchanges and banned any initial coin offerings and value of bitcoins have crashed to below $4000.
Bitcoin is not the only cryptocurrency though it is the most widely used. However, it and others like Ethereum need Blockchain to exist. Blockchain technology stores information of a transaction in each block which cannot be altered once created and acts just as a peer to peer ledger. Bitcoins are like monetary incentive which help keep blocks secure as people verify the legitimacy of the transaction to get bitcoins. However, now Blockchain technology is evolving and it is being made independent of cryptocurrencies and contents of blocks can also change. An important project called Hyperledger is being executed by Linux Foundation and it aims to make open source blockchains and related tools without using cryptocurrencies. More than 130 companies including IBM, Cisco, Intel etc are participating in it. Blockchain technology can allow control of information through secure, auditable and immutable records. This along with use of digital signatures based on cryptography allows identity of a person be uniquely authenticated in an irrefutable, immutable, and secure manner. Thus we have peer to peer transactions without the need of an intermediary.
This has implications for storage of passports, birth/death certificate, ownership documents, financial documents, medical historyetc.In 2014 a party called Denmark Liberal Alliance announced the use of Blockchain for online voting. The digital assets including payments can be exchanged without the financial intermediaries e.g. banks, stock exchanges etccutting time and costs, and reducing disputes. Settlements time of financial transactions could be reduced to T + few seconds from T + few days. Workflows can be improved across demand and supply chains.Even contracts can be executed in auto-execute mode as they would be maintained in a common database and the actions agreed beforehand. These “smart” contracts can make IoT autonomous.
A World Economic Forum report predicts that by 2025 ten percent of global GDP will be stored on blockchains or blockchain-related technology. Blockchain has potential to disrupt business models, economy and society unperturbed by the ongoing upheavals in bitcoins.
