What You Need to Know About Blockchain
By Leila Khan
In October 2008, Satoshi Nakamoto released a nine page white paper describing a “new electronic cash system” that is now projected by many to disrupt and transform the global fintech market. Over a decade later, blockchain technology still captivates worldwide audiences—a feat accomplished by few in the incredibly saturated tech industry.
Essentially, blockchain is a public, decentralized database of transactions; this database structure is often referred to as a distributed ledger. Each “block” of digital information is verified and subsequently encrypted with a unique cryptographic code (known as a hash), which is then added to the “chain” of transaction records. Once linked to the chain, these data entries become immutable, permanently and securely storing pieces of information.
Blockchain is most commonly recognized as the operative system for cryptocurrencies like Bitcoin and Ethereum. Unlike conventional transactions, blockchain eliminates the need for a third-party verification system by mechanizing the process, leading to more cost-efficient transactions. Besides the cryptocurrency industry, blockchain’s ability to seamlessly facilitate the transfer of assets generates a wide range of practical applications: supply chain logistics, voting transparency, healthcare data security, and even developmental aid initiatives. In other words, blockchain technology has immense potential to revolutionize the frontiers of cybersecurity, finance, and economic development. As a result, the World Bank predicts that the value added for blockchains will grow to more than $176 billion by 2025, and exceed $3.1 trillion by 2030.
However, future policy directives and institutional investment largely dictate the growth potential of the blockchain industry. According to a survey conducted by PwC, 48% of United States business executives reported that regularity uncertainty and user distrust serve as the greatest challenges to widespread blockchain adoption. This problem partially stems from its conflation with the volatile cryptocurrency market and illicit activity. These impediments, coupled with high production costs, highlight the urgency to develop a clear policy framework that analyzes the efficacy and vulnerabilities of blockchain.
Recent developments may induce such change. In late September, following the European Union’s investment in human capital and policy development, two regulatory blockchain bills passed in the United States House of Representatives. Specifically, the Blockchain Innovation Act and Digital Taxonomy act urge the Federal Trade Commission to submit a report to Congress about blockchain’s potential in commerce, ways to curb fraud, and recommended steps to propel blockchain innovation.
Overall, blockchain is still an emerging technology. Considering these present challenges, it may take a few more years before blockchain could become mainstream. However, with proper policy frameworks and educational initiatives, that seemingly distant stage could potentially turn into a reality.