Blockchain: the world is on the verge of a global reboot




We are living in amazing times; a time when world technical progress is accelerating more and more. Literally every year there are such novelties that simply “blow up the brain” of millions of people and show them new horizons for their development. Someone takes these achievements of scientific thought into service and changes everything around them, someone passes by. But what will be discussed next is not just a technical novelty; this is something that will literally reboot many businesses and organizations, including even government agencies, and change the whole paradigm of conducting and registering transactions and any other actions between people. Welcome to blockchain!

What is blockchain? Blockchain (translated as “a chain of blocks”) is an algorithm for constructing an information structure consisting of protected files (blocks), in each of which a certain number of records of transactions are registered. The blocks are lined up one after the other in a chain, thereby forming a single register of data on all operations taking place in this network. And new blocks are always added strictly to the end of the chain.

This chain is built on three very important principles:

1. Distribution

All blockchain users form a network of computers, each of which stores a copy of the blockchain data. Thanks to this, it is almost impossible to turn off or break the blockchain, since for this you need to turn off or break all computers. As long as there is at least one user, the blockchain exists.

2. Openness

All blockchain data – blocks and their contents – are always open to everyone. You can easily read any block and see all the records in that block. You can watch the chain and track the change in information. Thus, all data in the blockchain is easily verifiable, which means that you do not need to trust other network participants, because you can always check them and get a guaranteed reliable answer.

Simply put, in the blockchain, anyone can see that someone has a million. But who exactly has it – this one cannot find out until the owner of the million gives him a special key, thereby confirming that it is he who has the million.

3. Security

Security here means that the real costs of falsification remain so high that they lose economic sense or become nearly impossible.

So, at its core, the blockchain is a global database – an incorruptible digital ledger of economic transactions that can be programmed to record not only financial transactions, but literally everything that is of value to humanity.

Why can’t blockchain be forged? A block in the blockchain consists of a header and a body. The blocks in the blockchain are linked by keys, since the header of each block contains the key of the previous block. This is a very important and at the same time technically elegant solution ensures the security and non-hackability of the blockchain.

First, the key of each block is calculated based on the data of the entire block and the keys of the previous block. This means that not only the records of this block, but also all the previous blocks are encoded in the key of any block. Any, even the most insignificant, change in data in any block causes a complete change in its key, which, in turn, will require changing the keys of all subsequent blocks.

Second, the block key must comply with important security rules that establish the security level of the network. A very intricate procedure for calculating keys is used, which, of course, complicates the creation of a block, but it makes it even more difficult to create fake blocks, making it almost impossible. You will not be able to fake a chain or change records in a block, because the keys will change – and this will be immediately visible.

Where does blockchain originate from? Initially, this technology was created for the functioning of the BitCoin cryptocurrency. Other cryptocurrencies are created using this technology, of which there are several hundred today. The potential of blockchain technology to influence the financial world can be compared with the potential of the Internet (2nd wave – see my article “Cryptocurrency OneCoin: 7th wave on the way”), which at one time radically changed the information and entertainment market.

The blockchain always knows how many coins are in stock, as well as how many and when new coins will be issued, because the process of issuing new coins is precisely programmed. And the balance always comes together. Nobody can just take and “pour” another million coins, the algorithm itself will not allow this. And it will not be possible to withdraw the amount from the register “unaccounted for” either. All accounting is done using cryptography. All records are encrypted. Entry and exit are clearly tracked. A cryptographic record cannot be forged, duplicated or deleted like a simple electronic one.

What are the prospects for using blockchain? Blockchain is ideal for registering cryptocurrency-related transactions. However, at present, many serious investors have already realized that this technology can go (and will undoubtedly go) far beyond the limits of the cryptocurrency itself and will provide many more diverse opportunities.

In perspective, blockchain is:

– Transparent and cheap financial transactions;

– Fast and secure identification of users and documents;

– E-democracy without electoral fraud;

– Smart contracts that control their own execution, without intermediaries and lawyers;

– Reliable fixation of property rights;

– Open non-falsified registries of anything;

– Personalized tax system – you will know what each ruble paid to the treasury went to;

– Crowdfunding companies by issuing their own cryptocurrencies;

– Internet of Things with the ability to rent any device and quickly pay with it;

– Decentralized business processes in companies.

All these procedures will become easier and cheaper for users by eliminating intermediaries and regulators that are simply not needed in the blockchain.

Here is one simple example of a smart contract. Suppose, for example, that an elderly father wants to bequeath real estate under certain conditions. A lawyer of the future would code the will according to the father’s intentions and upload it to the blockchain. He would describe the property with a code, the sole purpose of which would be the objective execution of the will. If the father wished that after his death the house went to the son who first married or is getting married, then a special program that looks at the register of death certificates on the Internet, upon the death of the father, would immediately launch a search for all his sons in the register of marriage certificates, and then unsubscribe would be a home for one of them who is alive and the first to marry. The estate would almost immediately be rewritten according to the will of the father without the visit of a lawyer and without the examination of the will in the inheritance court.

Although this technology is still very young, its application in business is rapidly expanding. Judging by the fact that Goldman Sachs, Nasdaq and many other leading financial companies are investing hundreds of millions of dollars in blockchain technology, the changes that blockchain will bring with it will turn out to be more extensive even in comparison with BitCoin, which has important consequences for lawyers and the entire legal industry.

Most likely, at first, blockchain technologies will make existing processes more efficient, secure, transparent and cheaper, and when the blockchain earns the trust of users and companies, there will be a turn of projects that we have not even thought about!

Is blockchain the trend of 2016? 2016 will be the year of blockchain, because this technology will begin to actively penetrate many areas of our life already this year. You will see an avalanche-like growth of its popularity all over the world: new startups will be launched, new technologies and products based on the blockchain will appear, even the world’s largest companies will join the blockchain race. In terms of its importance, this technology is comparable to the creation of the Internet and ubiquitous smartphoneization, literally permeating the modern world and changing everything around: how we work, how we relax, and how we communicate with each other.

Numerous projects on the use of the blockchain are already being discussed in the world. Here is some of them:

1. Brazilian startup Bitnation has invited European governments to use technology to cope with an influx of undocumented refugees from the Middle East. The company offers migrants to issue virtual citizenship with registration of their data in the blockchain, a kind of passport that will be recognized by the governments of other countries. The service will allow refugees not only to obtain identification, but also to register marriages, birth certificates and other documents.

2. The Spanish bank Santander (10th in terms of assets in the world) claims that it will be able to use the blockchain in two dozen work processes within the bank. The use of technology, according to Santander analysts, can reduce the costs of financial institutions by $ 15-20 billion by 2022, primarily due to savings on cross-border payments, securities trading and “Know Your Customer” procedures.

3. Global financial giants – Goldman Sachs, JP Morgan and Credit Suisse and six other multinational banks – plan to develop common standards for blockchain technology and find opportunities for application in the financial services sector.

4. The American startup Everledger is going to record data on the unique distinctive features of diamonds in an open registry. In the event the stone is stolen, the record will provide conclusive proof of ownership.

The market is still in its infancy, although it is growing by leaps and bounds. In November 2015, the total investment in blockchain and BitCoin projects passed the $ 1 billion mark. The R3 consortium, created to develop new blockchain-based services, includes 43 banks.

What can be summed up? Blockchain is a reliable and open technology that will soon revolutionize our lives. For example, when the issuance of bank loans will be recorded on the blockchain, then no one will face credit fraud. And the “holes” in the bank balance sheets will also be clearly visible, therefore, large bankruptcies will be avoided. Scams with mortgage apartments and credit cards will simply not be possible – and many people will avoid problems and financial losses. Even government services related to paperwork, issuance and confirmation of rights and certificates can be implemented in the form of a convenient and open register based on the blockchain.

The Internet of Everything needs a Digital Book of Everything. Get ready for the World Digital Book. She’s just around the corner! I believe that truth (which the blockchain provides so effectively) can free us, and trust in the data (which is stored on the blockchain) will completely change every aspect of our lives. Currently, blockchain-based applications are being created around the world that can meet all these needs of humanity.