Popular Science About Blockchain and How This Technology Will Change the World

In the 20 years or so that a new technology enters the market, it has the potential to change the way we communicate, the way we do business and advance everything we can think of.

In the 1970s, personal computers were invented; in the mid-1990s, the commercial Internet emerged. Now, a major technological development called blockchain is in its infancy.

"Blockchain" is a shared, decentralized ledger that allows transactions or data to be securely stored and verified without the need for any central authority. All transactions are part of a chain and verified in blocks by different nodes on the network (hence the name "blockchain") - mathematical algorithms are used to ensure that transactions cannot be interfered with once recorded. Transactions are stored on a global ledger, which is why this technology is often called a distributed ledger.

Banks are currently testing the backend functionality of the technology, but transactions on the blockchain do not necessarily need to be financial, and the data transmitted does not necessarily need to be monetary.

All this system requires is a token (Bitcoin is the most popular one currently) to carry transaction data around the network, and an incentive mechanism to encourage individual nodes (currently “miners”) to use their computing power to verify transactions.

Why is it important?

The Internet of Things (IoT) of peer-to-peer connections would not be possible if transactions still required central control. Gartner predicts that 25 billion new sensors will be installed a decade from now, many of which will require machine-to-machine micro-transactions involving data, software updates and possibly “smart contracts.”

There are three interesting aspects of these transactions:

1. They are micro-payments that enable frictionless transactions.

2. The amount of data created by this decentralized network will be staggering, and technologies like machine learning and cognitive computing will become even more important.

3. Due to the low cost of transactions, more and more people will have the opportunity to obtain goods and services that they could not obtain before.

In addition, now that data has truly become currency, we can trade different data (somewhat similar to a digital "barter" system). Even more exciting is that this new currency will become programmable, and we now call it smart contracts.

You can think of our mobile phones as nodes.

In the Internet of Things, a refrigerator can also be a node, and "I" can also be a node. This is where I think blockchain and identity become interesting for individuals. We can carry this information ourselves. This global ledger can also allow each of us to store our own data in this highly secure "safe".

We also need to decide what data we want to trade with. For example, every time we go to a new doctor, we have to write down our medical history. Imagine if your medical history, medication use, and surgeries were all independent, decentralized data on the blockchain...

Next, you need to identify and send the data you want to transfer to someone else - whether it's a new doctor, an insurance company, a research organization, or other stakeholders. You also need to know that the data is secure and cannot be hacked (databases of large insurance companies are targets for hackers because these records can be used to obtain funds on illegal websites).

1. Finance

When an asset is traded, it can be difficult to tell who owns it, especially when transactions occur quickly.

Blockchain can solve this problem, either by causing a complete failure in the system due to faulty accounting (similar to what happened in the banks in 2008, when transactions happened so fast that no one could track the assets), or by causing the need for large amounts of storage - which can tie up capital and make it expensive for people to do business.

The distributed ledger records who owns the asset and allows anyone to view this global database (under the right terms and conditions).

A bank or buyer can query the blockchain to make sure the other party has what they promised, and this can happen instantly. Now that people don’t have to pay extra administrative fees to double-check records, banks should, in theory, be able to reduce their fees.

Imagine the unbanked people around the world. When we borrow money from a bank, we are assessed by the bank based on our previous financial history and whether we have the ability to repay.

More than 2.5 billion people in the world have no recorded financial history, which severely limits the credit they can take out: for example, to borrow for a child’s education, to start a business, or as a farmer if a harvest fails.

Imagine if you could check a person’s identity, credit, and other information through a verified and untampered record.

What economic opportunities would individuals or businesses have if they had access to financial services, such as savings accounts and loans? If you can assess the risk of lending money or doing business with them, you are more likely to do business with them.

In the United States, the average person moves 11 times in their lifetime.

Most sellers and buyers will use a third-party company to reduce the risk of fraud and ensure a smooth transaction. The general third-party fee is 1~2%.

By using blockchain to verify ownership, property owners can transfer ownership to others without requiring large costs.

A house’s data can also be put on the blockchain—all the repairs, ownership history, etc. This provides an immutable record of ownership so that potential buyers can view all the information about the house.

The more information a seller provides, the more likely he or she is to get a good price in a deal negotiation. This transparent and efficient market creates value for both sellers and buyers and incentivizes owners to take good care of their homes.

The art market is one of the most unregulated markets in the world.

Millions of dollars are often transferred with little documentation, and existing systems make it difficult to trace the history or provenance of a piece of art.

As a global public ledger, blockchain adds a lot of transparency to this market - every piece of art can be registered on the blockchain, and every transaction and transaction price can also be recorded.

2. The Future

These examples are just the beginning. Just as we couldn’t imagine our current hyperconnected world 20 years ago, we can’t imagine the future applications of blockchain today.

But the fact that companies like Goldman Sachs, IBM, and Cisco, as well as organizations like the World Economic Forum, the IMF, and the Bank of England are experimenting with the technology shows that this is not a passing fad, but a reality.

A blockchain-based world will establish trust between multiple parties in a transaction without requiring them to have a personal connection. Our current system uses confirmation and verification and needs to balance costs. The blockchain world will not only make transactions faster, cheaper and truly global, but also allow each of us to control and track the distribution of our own data.

Combining blockchain technology, machine learning, and the development of related applications can create an unprecedented global economic opportunity.