How Blockchain Technology is Impacting the Banking Industry
If you’ve watched the news or read a newspaper lately, then there’s a good chance that you’ve heard about the rising value and popularity of cryptocurrencies like Bitcoin. Behind these cryptocurrencies is blockchain technology.
Less than a decade ago, blockchains are what made it possible to create, trust, and distribute currencies like Bitcoin. Take a closer look at what blockchains are, where the technology came from, how it can be used in other areas, and why it matters to you.
What is Blockchain Technology?
While the phrase blockchain technology might be familiar to most people, the definition is often confusing. It is true that there is no simple way to explain blockchain technology in a sentence. That’s because the technology itself is complex. That, after all, is what gives blockchains their security.
In a nutshell, blockchains are decentralized and digital ledgers for transactions. If that still sounds confusing, let’s break it down further.
First, let’s think about how banking works today. Most digital financial transactions, whether you’re paying bills online or cashing a check, a software program moves money from your account over to theirs. You’re not actually physically moving the money around, but you’re trusting someone else to make a mark on a ledger and decrease your balance while increasing someone else’s.
The beauty of blockchain technology is that you no longer need a third party. Instead, every participant has a record of all transactions, but they are pseudo or nearly anonymous. Everyone has access to this public and digital ledger, and everyone can verify that the money is being moved appropriately.
In this way, no one must trust a single person. Everything is open and verifiable, so it is almost impossible to cheat, steal, or lose financial assets.
Blockchain takes it a step further by locking or sealing the ledger at intervals. After a set number of transactions, the data is locked and becomes a sealed block. No one can ever alter those numbers today, tomorrow, or a year from now.
This greatly reduces the possibility of fraudulent activities, including the creation of false financial statements. Every financial transaction is anonymous, but nothing can be hidden.
The Origins of the Blockchain
Part of the mystique surrounding blockchain technology and Bitcoin is how the technology originated. The first research into this field began back in 1991 when the concepts – of blockchain technology was first brought together under one idealized concept. However, turning that idea into reality would take another 17 years.
In 2008, Satoshi Nakamoto revealed blockchain technology in a practical way: As the system of Bitcoin. Satoshi Nakamoto is a pseudonym that refers to either a single person or a group. The mystery shrouding the actual invention of Bitcoin only adds to both the intrigue and the confusion of cryptocurrencies. Once blockchain technology worked in Bitcoin, it was clear that it could also have other applications.
Blockchains and Bitcoin
Throughout history, currencies have increased and decreased in value. There are plenty of fluctuations in every market, and that’s why inflation and diversification are both such hot topics in the world of investing.
Bitcoin is also subject to those fluctuations, although lately, its value has been on an upward trajectory. The true value of Bitcoin, however, may not be its face value. Instead, it is the benefits of blockchain technology that are so appealing to many individuals around the world.
Bitcoin means that you don’t need to rely on a single bank or financial institution. Traditional banking isn’t going anywhere, but blockchain technology provides you with a completely different way to hold assets. Digital currency is entirely decentralized thanks to blockchain technology. As a result, no banking system or governmental failure will cause you to lose your assets. As blockchain technology remains secure, your assets also remain secure.
Blockchain also makes Bitcoin appealing because of the privacy. While everything is still easy to verify, no one’s name is visible. In this way, investors can have more financial anonymity. In a world where virtually, everything is discoverable in some way or another, this type of financial privacy is a definite advantage to many people.
Other Uses for Blockchain Technology
Bitcoin and other cryptocurrencies are just a few examples of how blockchain technology is changing the world. In fact, it might be argued that Bitcoin is just a blip on the radar compared to the potential ways that blockchains can be used in countless industries around the world.
Government, banks, and health insurance companies are already learning about how they can start to implement blockchain technology into their own data storage and protection. Hacking and cybercrime are growing concerns, but blockchain could potentially decrease that risk in a serious way.
Without third-party fees, banking in third-world countries could potentially be cheaper and easier, giving millions of people financial freedom in a way that has never been done before. Patients could take control of their own medical history, sharing only the relevant sections when necessary. In short, blockchain technology has potential across the board, and you should expect to see it being used widely in the years to come.
Why Blockchain Technology Should Matter to You
Pretend it is 1991. You’re just hearing about something called the Internet, but it seems like a strange concept. You might be interested in it, but you can’t imagine that it could make any meaningful impact on your life. It’s so strange to think about that now when most of us rely on the Internet thousands of times a day for countless reasons.
Twenty years from now, we may look back on blockchain technology in the same way. The way the Internet revolutionized information sharing, blockchain technology is now revealing its potential to revolutionize data protection and security.
To learn more strategies for protecting your wealth and maintaining financial privacy, contact Caye International Bank today.