In the traditionally staid financial sector innovation comes slowly and with much discussion. In the last twenty or thirty years the only real and sudden progress has come from the controversial and entirely virtual Bitcoin.
Initially an experiment in creating a new currency Bitcoin quickly became a fashionably de rigueur item amongst the technophiles of the world. However once it became known that Bitcoin transactions were anonymous and virtually untraceable it was adopted by shady organisations to pay for drugs, weapons and other illegal or illicit goods. At the heart of Bitcoin though is a system called Blockchain that, now that knowledge of its workings are better known, has the potential to revolutionise how finances, economics and even countries work.
Blockchain is a uniquely digital system that relies on a simple concept implemented effectively with a near unbreakable failsafe. Located in geographically, and computationally, isolated places around the world is a network of node machines that track every Bitcoin transaction in real time. Each node calculates all elements of the payment, for example initial balance on both sides, value of the coins and ending balance. The nodes then share that calculation amongst each other on the network and check the workings of every other machine. So long as the machines tally and a majority agree on the result it’s entered into a ledger that’s stored on each machine.
This set of checks and balances means the system is effectively unbreakable. Without a centralised ‘control’ machine affecting the result of the calculation would mean hacking the majority of machines globally at the same time to produce a majority decision and doing so before the transaction has been entered into the ledger, as once it has been entered it cannot be edited or deleted. Doing all this is technically possible but would require a level of logistics and skill far beyond all but the most skilled team of hackers.
Blockchain also offers an unparalleled level of anonymity built into its own system. With the trust that comes from the power of the democratic decision it doesn’t need to verify the identity of the parties involved just that the accounts have the necessary funds and credentials to back up the transaction. This confidentiality is one of the major appeals for the underground Bitcoin traders in illicit goods but like all innovation just because it is used for evil doesn’t mean it can’t be used for good.
If the potential of Blockchain were applied to other systems then the benefits could be huge. Already major conferences are being held amongst the big banks to look at applying Blockchain to their own organisations but it doesn’t have to stop there. A voting system that is incorruptible with a guaranteed accuracy or health records that are completely anonymous but constantly updated could revolutionise the way a nation operates without requiring an actual revolution in the streets.