04 December 2017

Why blockchain matters, even if you don't care about cryptocurrencies

Today, the world is increasingly aware of cryptocurrencies. But the idea has taken almost a decade to get attention.

When Bitcoin debuted in 2009, it largely appealed to economics geeks and libertarians who hoped it would usher in a new era of efficiency and financial decentralisation. However, Bitcoin's real contribution may turn out to be blockchain, the technology on which it runs.

A blockchain is a distributed ledger, which means transactions are recorded and encrypted across a network of thousands of computers. If your eyes have begun to glaze over at this point, you're not alone. Thinking through abstract computer concepts is challenging, and unless you're a enthusiast, you might not see much incentive to stick with it.

How it works

Blockchains are built using cryptography and hashing algorithms that verify and encrypt data sets, or blocks, that are chained together by computer code. No single entity controls the blockchain, and once recorded, transactions cannot be erased. Because of this decentralisation and the permanence of the records, many people see blockchain as a means of ensuring transparency in financial transactions.

However it must also be noted that such innovation means legal and regulatory bodies are closely monitoring the developing technologies in the interests of the consumer.

But how blockchain works is less important to the average consumer than what it can do.

Proponents of Bitcoin and other cryptocurrencies note that without a central bank or government facilitating exchanges, transactions are faster and cheaper. Which means blockchain holds significant implications for a wide range of financial interactions — ones that feel much closer to our everyday lives.

Let's look at a couple of them:

Paying taxes

One of the most appealing aspects of blockchains is the potential for data security. Since no one can alter transactions once they're made, there's less risk for tax fraud and it's easier to track individual payments. The distributed nature of blockchain records ensures that both businesses and individuals will capture the full gamut of their relevant tax information, making it easier to file come tax time.

Online voting

Earlier this year, the BBC advocated for a shift to digital voting. With smaller nations such as Estonia already allowing online voting, with minimal security issues, it seems only likely that the UK will ultimately follow suit - perhaps in the very near future.

Blockchain could help spur that transition. One of the core concerns about online voting is its susceptibility to hacks. These attacks can be used to interfere with a wide number of devices, including personal routers and webcams, and the hacks are becoming increasingly severe, according to Deloitte. However, because blockchains are distributed across a securely connected network, they're more resilient against these attacks.

Blockchain's only just begun

The implications of blockchain technology extend even further than taxes and voting. In the not-too-distant future, personal identification methods, like passports, could become linked to blockchains. Birth, marriage, and death records may soon undergo a digital transformation as well. Meanwhile, blockchain-secured smart contracts could facilitate faster, lower-cost agreements on a wide range of goods and services.

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About the author

Casey Hynes

Casey Hynes is a freelance journalist writing about fintech, AI, economic development and personal finance. She's written for the Wall Street Journal and the Washington Post.

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