Blockchain technology is a peer-to-peer distributed and redundant filing and accounting ledger that ensures the security of Bitcoin and other cryptocurrency transactions. Each individual cryptocurrency has a unique and separate blockchain.
The technology has far reaching implications that could provide profound benefits to a wide range of industries.
Blockchain technology operates in a similar yet distinct way from Bittorrent files. Both technologies use checksum and hash functions to ensure data fidelity, but with Blockchain the data files are much smaller than in Bittorrents, and the need for fidelity much higher.
Blockchain acts as both an accounting ledger and a purity control. Using checksum and hash functions over a peer to peer network, Blockchains ensure cryptocurrency transactions are secure and accurate.
Because of the distributed nature of the network, transactions are irreversible, solving the double-spending problem.
In order to falsify a cryptocurrency transaction, it would be necessary to simultaneously alter the data on the majority of computers in the peer to peer Blockchain network. All of the alterations would have to be identical in order for the alteration to be successful. Failure would result in an invalid Checksum and the transaction would be unsuccessful. This makes counterfeits and double-spending functionally impossible.
This level of automatic and autonomous accounting and security gives Blockchain the potential to revolutionize many industries.
Viral Potential of Blockchain Technology
Any industry that keeps maintenance and accounting logs could benefit from Blockchain-based ledgers. Major industries that could benefit include:
- Equity Markets
- Resale Markets
- Inventory Control
- Medical Records
- Legal Documents
- And much more
By removing human access to the data storage and accounting files, errors would be radically reduced – if not eliminated entirely. Transaction and maintenance costs would also be dramatically reduced.
Blockchain Technology as Monopoly Buster
In order to maintain control, a monopoly requires centralized control. Industries with monopoly or near-monopoly status include but are not limited to:
- Cable TV and the Internet
- Energy Grids
- Insurance Providers
- Hospitals and Healthcare Organizations
- Municipal Utilities
- Radio Frequency Licensing
- Central Banks and related currencies
By allowing for distributed and decentralized transactions and record keeping, Blockchain technology could disrupt the centralized control necessary to maintain monopolies.
Governments often grant monopoly powers in industries with large, built-in obstacles to decentralization. This has been done in classical and legacy systems as a way to bring order to the marketplace to ensure consumers are not cheated or abused, and to protect against the tragedy of the commons.
But monopolies come with their own abuses. Without competitive pressure, monopoly holders can charge what they want and have no incentive to improve their product. Abusive monopolists can even withhold products and services from consumers they do not deem worthy.
By decentralizing the transaction process, Blockchain allows for greater autonomy in relevant markets. The accuracy and transparency intrinsic to the process ensure chaos and disruption will actually be lower than in legacy systems.
Blockchain Technology and Added Value
In Business 101, the first thing you learn about is added value. If you want to succeed in business you must create or add value for your customers.
Blockchain, by itself, can add value in many ways. The first and most obvious way Blockchain adds value is in reduced accounting costs and lower (much lower) error rates, but this obvious value is only the tip of the iceberg.
Medical errors are estimated to kill over 250,000 Americans each year. This makes medical errors the 3rd leading cause of death in the US. Blockchain mediated medical records would automatically reduce the error rate by a significant percentage, and would provide the foundation for additional interventions that could reduce the error rate by an order of magnitude or more, saving millions of lives, reducing the cost of healthcare and insurance, and restoring hundreds of billions of dollars of lost productivity.
Secondary markets are a trillion dollar industry. Automobiles, homes, boats, and other big-ticket durable goods are often resold, but fraud and abuse are rampant. The cryptocurrency market could address parts of this. With Blockchain and the cooperation of licensed contractors and service providers, fraud could be reduced by providing accurate and easy to acquire histories and maintenance records for these goods.
Trust in used goods would rise leading to a decrease in demand for new products, thereby driving down prices for price sensitive consumers.
A Blockchain For Everything
By reinventing the way people keep records and complete transactions, Blockchain has the potential to streamline economies, reducing costs to producers and consumers alike.
With the streamlined accounting and security offered by Blockchain, the potential for creative destruction spans dozens of industries. Cryptocurrencies and Bitcoin alternatives are only the beginning. The potential of Blockchain is far reaching, from banking (have you used a Bitcoin ATM yet?) and insurance to ride sharing and secondary markets.
At present, the future of Blockchain is fluid and uncertain, but where it is adopted it promises to revolutionize the way we do business and organize our lives.