Between 2014 and 2015, investors poured $800 million into blockchain startups.
The market for blockchain is expected to reach $7.7 billion by the year 2022, up from $411.5 million last year.
Today, no one can seem to stop talking about this fancy new technology that will fundamentally uproot the world as we know it.
If we’re to cut through all this hype… is blockchain actually going to affect our businesses in a meaningful way? Or can we ignore all the hubbub without consequence? Yes and no to both.
Wait, so what does “blockchain” mean again?
Blockchain is a type of database that runs each new record through a multi-pronged, peer-to-peer validation process. Validated records are stored securely over multiple distributed computers, and (theoretically) cannot be altered or deleted.
This is the technology behind Bitcoin. To paint the picture, here’s how a typical transaction plays out from a high level:
- You want to transfer Bitcoins from your wallet to someone else’s. You get their digital wallet address, and submit your intended transaction for approval.
- Your transaction request is sent out to individuals in the Bitcoin community, each of whom count as a “node.”
- Nodes are asked to confirm your transaction. (Do you actually have enough unspent funds in your wallet to make the transfer? Does the transaction conflict with any others?)
- If a node finds the transaction valid, they compile that transaction, along with several others they’ve approved, into a “block.”
- The block itself goes through another validation cycle. When approved, the block is officially added to the blockchain, which each node keeps a copy of on their own machine. This counts as one confirmation.
- As another block is appended to the end of the chain, your individual transaction is either reconfirmed or invalidated. Should your transaction be confirmed 6 times, your transaction is considered secure.
This validation process is what we call “Bitcoin mining,” where miners (nodes) find and compile blocks, complete a math problem as proof of work, and are rewarded for their work with, yes, Bitcoins.
Okay… but why are people freaking out about it?
There are some real benefits to this technology that can’t be replicated by traditional institutions. Thanks to the distributed nature of this sort of database, we now have a way to store legitimate data with an incredibly low risk of it being compromised.
Beyond cryptocurrency, there are a few areas in particular that blockchain is expected to “revolutionize” (a list that will continue to grow as different industries devise more and more clever applications):
- Financial transactions in the form of “smart contracts” that can automatically trigger the transactions once predetermined conditions are met.
- Protecting and authenticating your identity, medical history, educational certifications, and similar records.
- Tracking assets ‑ digital or physical ‑ in a way that prevents titles and other records of ownership from being lost or destroyed.
- Storing corporate data without risk of it being breached or lost.
Interesting! But will it affect MY business?
Cryptocurrency, as we’ve already seen, is a volatile market that is not ready for widespread adoption; most of us won’t have much to gain by accepting these transactions in place of dollars any time soon.
We are, however, starting to see large nonprofits like the World Food Programme work to use blockchain-based digital identity verification to provide aid to refugees in a more efficient and cost-effective way, and may see other humanitarian aid programs follow suit.
Blockchain is definitely a better and more secure database – that means it will absolutely have an impact – and the technology will very likely mature into some useful applications over the next several years.
So if your business is generally looking to get ahead of the curve on this up-and-coming industry, or if you see your clients taking particular interest in any of its potential applications, you would be wise to jump in fully, and jump in quickly (this isn’t something you can quickly “read up on” ‑ you’ll need to immerse yourself in the community).
But in general, I think we still have a ways to go before this technology becomes mainstream, and before it affects most of our businesses in any substantial way; the whole “revolutionary” concept seems bit dramatic for my taste.
So no, I would not advise ignoring this trend altogether.
But yes, I do think we can all settle down a touch.
As originally published in the American City Business Journals.