Bitcoin and Blockchain
First Definitions:
Blockchain – Distributed database that tracks all transactions and therefore provides “verifiable proof” of activities between parties. The hope is that “trust” in any entity will be removed from the transaction and no single party will be paid to act as an intermediary to facilitate our trust. No banks to clear checks, no credit card companies to charge items, no vendors promising inventories that do not exist, etc. …..
Cryptocurrency – the currency the distributed database uses as payment for services or products rendered. It only exists on the database and is therefore only valuable within that database. It is secured by a lengthy password so don’t lose your password because it is like losing $$ bills.
Bitcoin – just one of the databases. Bitcoin alternatives today include IBM, Ethereum, Steem and Stellar – and more coming. Notably, Goldman Sacs filed a patent for its own cryptocurrency known as SETLcoin. These are known as cryptocurrencies because they only exist on the distributed databases. They are decentralized currencies that are not backed by the full faith and credit of a sovereign government.
The Problem:
So you probably see the problem coming already – if multiple companies have their own currencies tracked in their own databases, what happens when transactions are desired between databases. Who will clear (verify) these transactions? This is where you can expect banks, credit card companies and even investment houses to provide products and services to protect their positions as trusted intermediaries.
We often think of blockchain databases in monetary terms but the application goes much further. IBM is already using blockchain as an inventory tool and healthcare applications are not far behind. Think of the implications of a blockchain database with health information – how it offers both potential and pitfalls. The good is that your doctor would have a better understanding of you as an individual – not in just some average or norm. So could your insurance company. The bad is flexibility – what if you wanted to change doctors or insurance company?
The Future:
Many believe that blockchain is said to be the next internet. Maybe so. If so, the big question are:
1. Who will be the next Microsoft, Google, Amazon?
2. Who will we trust with our information?
3. Who will we trust with our assets?
Only time will tell.