Blockchain: what is it and how it works
Blockchain is one of the hottest concepts around right now. But what is it, what is it for and what is its future? If you need answers to these questions, this article will give you some insight into this disruptive technology.
It's always good to keep up with the latest trends, and more so if that trend is blockchain, the sharing economy system that many in the specialized media believe will revolutionize banking. Here is BBVAOpen4u's overview of this phenomenon:
1. What is blockchain?
It is the technology behind bitcoin, the cryptocurrency everyone's talking about. It supports secure and reliable financial transactions between two parties without intermediaries, thus driving down costs.
For a more detailed answer, you need to know that the bitcoin ecosystem is based on APIs. This means blockchain is a sort of huge database distributed across numerous servers around the world, which compiles all bitcoin transactions. Each one of these encrypted and authenticated transactions is added to the chain of blocks – or blockchain – on which the bitcoin system is based. APIs make this process possible.
PwC has created a detailed infographic entitled ‘A look at blockchain technology’ that perfectly illustrates what it is, its main benefits, and potential applications. The consultancy firm also released a rather concise paper to describe what it is.
Other insightful infographics include this breakdown of blockchain provided by followmyvote, and this infographic from Value Walk entitled ‘Blockchain Technology Is Changing The Digital World As We Know It’.
2. How it works
Before we can use blockchain technology we need to understand how it works. If you want to delve deeper into the functioning of blockchain, check out this comprehensive and interesting infographic from TechTarget. There are details on how to deploy blockchain, links to case studies, and opinions from experts such as Carl Lehmann from 451 Research and David Furlonger from Gartner, as well as a brief glossary.
Bitcoin Magazine also provides a fantastic ecosystem snapshot to illustrate how it works. In the fall of 2015 BitPay and BTC Media (the parent company of Bitcoin Magazine) commissioned Josh Dykgraaf, an Amsterdam-based artist specializing in photographic illustrations and 3D modelling, to design an infographic to guide users through the emerging bitcoin and blockchain ecosystem. The infographic proved so popular, and the ecosystem's growth has been so rapid, that BTC Media commissioned Dykgraaf to create an updated poster, which was unveiled in March 2016 at the SXSW festival and is available as a digital download or printed copy. Jacob Donnelly also wrote an interesting article to go with the poster, discussing the origins of the technology, its evolution and its scope.
3. Its role
In an article entitled The role of bitcoin and blockchain in the future of fintech, BBVAopen4u took a detailed look at the implications of this technology for the financial industry. It also refers to a study by consultancy firm PwC that found that 60% of banking professionals claimed to be familiar with this protocol, which threatens to radically overhaul the industry. It allows banks to slash costs while also ensuring greater transparency for transactions, thus helping operators to comply with regulations.
As Microsoft's Business Technology Strategist Pablo Junco points out, this is precisely why the financial industry has been quickest to adopt the technology. In an interview for BBVAopen4u he explained that "combining blockchain technology and APIs to create platforms could drive a vast range of businesses in the financial industry".
In fact, the article states that some leading companies' core business is to buy, sell and use bitcoins in a range of fields that require an application programming interface (API) and blockchain, the technology behind it (transactions, M2M, prediction and privacy). Some of the largest such projects include Coinbase, Bitpay, Blockchain, BlockCypher and Block.io.
If you want something more visual, take a look at this infographic on "The eruption of blockchain in the financial services industry”, or this link, where its future is explained in 8 charts.
4. And also:
More information can be found in:
- This ebook: The union of the bitcoin and APIs
- And this article: How is BBVA preparing for the blockchain revolution?
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