Blockchain – The Trust Machine - Essay Example

Last week the Economist dedicated its front page to the Bitcoin Blockchain, which will help to improve the image of the cryptocurrency.

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Many experts believe that blockchain technology will dominate the future of finance.

Recently, twenty-five banks have joined R3 CEV, a bitcoin startup, in order to develop common standards and NASDAQ, will start using the blockchain technology to record trading in securities of private companies.

For the past many years, Bitcoin is known to have a bad reputation. There have been many news stories related to hacking and cybercrime such as extortion, purchasing drugs and hiring hit men in the online markets of the “dark net”.

The digital currency is also known for its wild fluctuations in its value and the fervor of its supporters and its decadent uses.

Many people also fail to recognize the extraordinary potential of the blockchain technology because of the dubious image of bitcoin. As we wrote before, bitcoin is the incentive of the blockchain.

Many financial institutions are also adopting blockchain technology such as the Australian Securities Exchange, which is planning to replace its Clearing House Electronic Subregister System (CHESS) clearing and settlement system with blockchain technology.

Blockchain is a decentralized public ledger of debits and credits and is not owned by any company or individual.

Blockchain applications are created to handle services such as trade settlements, digital ownerships, assets transfer, origin verification and many others.

In order to understand blockchain, a helpful analogy is with Napster which is the pioneering but illegal “peer- to- peer” file sharing service that went online in the year of 1999.

It provided free access to millions of music tracks. In 2001, it had to shut down the entire network to comply with the injunction but it has inspired a host of other peer- to- peer services which also pirated music and films.

In spite of all, the peer- to- peer technology has found legitimate uses which includes powering internet startups such as Skype, Spotify, and Bitcoin.

Blockchain is trustworthy in a “trustless” world. After people transact, a public record of all the transactions is automatically created and then the computers verify the transactions.

The process is real- time and instead of relying on a central authority to verify the transaction, this is more secure.

Blockchain might be a tedious process, but it has the potential to transform on how people and businesses cooperate.

In addition, the CEO of Heartland declared that blockchain could power trillions in bank transactions.

He added “It seems to me that the play is for banks [to use blockchain] to settle between themselves. There’s trillions in very high-end transactions going back and forth across borders between businesses,”.