So, what exactly is a blockchain? A blockchain is a public ledger of all transactions that have ever been executed. It is constantly growing as ‘completed’ blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order through cryptography, ensuring that they remain meddle-proof. The blockchain thus stands as a tamper-proof record of all transactions on the network, distributed to all participants.
Thus the validation of any recording on the blockchain isn’t centralized, eliminating the need of a third-party to an intermediate. To put it to better use, these distributed ledgers can be open or permissioned, or restricted or unpermissioned, in terms of the number of people who can access the information. There is an irrevocable trail of all the transactions that have ever been made, which makes attempts of hacking or fraud unsuccessful. Thus, blockchain offers a chance to work at lower costs with greater regulatory compliance, reduced risk and enhanced efficiency. According to a survey report by the World Economic Forum, “10% of global gross domestic product [will be] stored on blockchain technology by 2025.”
According to a Deloitte report, a blockchain is “a technology that allows people who don’t know each other to trust a shared record of events. This shared record, or ledger, is distributed to all participants in a network who use their computers to validate transactions and thus remove the need for a third party to intermediate.”
Banks have been among the first to look at the benefits of the cost advantages and efficiency that this technology offers them. According to Santander InnoVentures, “distributed ledger technology could reduce banks’ infrastructure costs attributable to cross-border payments, securities trading and regulatory compliance by between $15 – 20 billion per annum by 2022.” It’s no wonder banks are “openly and secretly” working in their own innovation labs to explore the technology. In fact, as many as 40 banks from across the globe have joined an R3 Cev consortium working on the distributed ledger technology. On January 20, R3 CEV announced, “the successful completion of a groundbreaking distributed ledger experiment involving 11 of the world’s largest financial institutions.”
Blockchain and Business
The public sector is another area where blockchain has potential use. It can help to make the public sector service more efficient by plugging the loopholes; matters such as citizen identity, vehicle registry, pensions, tax payments, patents and asset (real estate) can be registered on the blockchain. Additionally, industries such as media, diamond, music and healthcare have already started tapping blockchain technology.