Blockchain – What’s it all about?

Essentially blockchain technology is a distributed ledger tech for real-world applications. It is a peer to peer entity which is not maintained by any one organization, but is open to all blockchain members. A blockchain ledger is replicated across all users of that blockchain and when a transaction is updated in one ledger, all other ledgers are simultaneously updated in chronological order. Everyone in the blockchain can see and verify the chain of events. The ledger is also reportedly indelible.

Blockchain really came about after the financial crisis of 2007 and was used most popularly as the ledger system behind Bitcoin. Virtual currencies were transferred around, using blockchain as the decentralized way of recording and verifying ownership and the transfer of ownership of currencies, but it’s not only a means of transferring and controlling cryptocurrencies. It is being touted as much wider and by other industries. For buy-side asset management firms, blockchain could be a way of removing the need to use an intermediary between clearing and settlement when a trade has been made. If transactions can be done and settled within seconds, there is no need for a services company to act as an intermediary, deals can be closed more quickly and reporting can be done in a more timely and accurate fashion. By taking blockchain further and writing in smart contracts, firms can build in automated, self-executing contractual clauses. These are triggered when certain parameters are met, and are verified by the blockchain members before being executed. Wins all round.

Safety in numbers

With no centralized control over verification, and no single owner of the truth, there is an element of safety in numbers. Each blockchain user verifies the transaction, and there has to be a majority in order for the transaction to be verified and committed to the ledger for evermore. Hackers can’t simply break in and verify a fraudulent transaction, they would be rejected and the system would automatically reset.

Blockchain is not infallible though, as the recent hacks into Ethereum suggest. Konstantinos Karagiannis, Chief Technology Officer, Security Consulting, BT Americas, speaking at the 2017 RSA conference warned that adopters of blockchain should be aware that the technology is built on public encryption keys, which can be cracked with quantum computing, and recommends testing and ethical hacking exercises to make sure the technology is as secure as it can be.

With the healthcare, logistics, property, music and other industries seeing blockchain as the next big thing, there is no denying that it is making waves and technologically savvy firms should keep an eye on it. It could be the technology to give you that much needed competitive edge, trimming down essential costs and speeding up trades and settlements. And when you think about cybersecurity, the systems we use at the moment are not completely secure, so it would be foolish to dismiss blockchain out of hand.