Blockchain is a relatively recent form of technology devised originally as the technology underpinning bitcoin.
The inventor or group of inventors behind the blockchain is known as Satoshi Nakamoto, a pseudonym, with nobody yet knowing for sure who this is. Since being developed, blockchain has been put to countless uses across the globe, within multiple industries.
Essentially, blockchain provides us with new and better tools for authentication and verification of transactions online. From its initial use as the foundation of secure cryptocurrencies, blockchain technology has evolved to become a fundamental part of many of the digital transactions that take place in the world today.
Thibaut de Roux has been following the ways in which blockchain has revolutionised global business, and the foreign exchange industry in particular. This technology has rapidly gone from a single-use software to something that permeates or will soon permeate almost all online transactions of any format.
Formalising Digital Relationships
While blockchain began in the cryptocurrency sector and remains mostly in the financial sector, its uses have spread far and wide. In any arena where digital relationships need to be formalised, records kept securely, and the system of records be managed without recourse to a central authority, people and organisations are increasingly turning to blockchain.
As a decentralised ledger system, blockchain provides data security without having to employ a central authority. New digital relationships can therefore be formed without a third party needing to be in control. Due to the nature of blockchain, it is not suitable for everything – some transactions or systems will naturally require a centralised authority.
However, in more than ten years of use, the technology has proven itself to act as a secure and trustworthy system for verifying transactions of many different types across a variety of industries.
As the technology becomes more sophisticated, blockchain is beginning to speed up and offer new advantages. However, for businesses or systems where transaction speed is the number on priority, it may still be better to turn to a centralised system in the traditional model.
Part of what makes blockchain secure is the mining or processing of each block in the chain. This naturally slows things down somewhat, so businesses that require high-performance transactions in milliseconds may need to wait a while before blockchain will meet their needs.
However, the private key cryptography underpinning the technology introduces not only digital security, but also the potential to deliver a service much more cost-efficiently that anything else currently available on the current market.
Establishing Digital Identity
One of the key performance elements of blockchain is its ability to establish digital identity in a secure and relatively fast way.
Combining two cryptographic keys – one public and one private – for each transaction creates a digital signature of sorts, which can be used to identify each user. The public key acts like an email address in terms of identifying someone in a crowd, while the private key is used to formulate consent to digital interactions.
In a distributed ledger system such as blockchain, each participant is responsible equally for ensuring that all transactions are verified and added to the network. New information can only be added to the blockchain network if the majority of people – or nodes – on the network agree.