Source | www.businessinsider.nl : By
It’s a technology conceived by the mysterious creator of bitcoin – the digital currency championed by a motley crew of privacy-obsessed libertarians, social activists, and some criminals.
Now the idea of blockchain has gripped Wall Street’s biggest institutions.
Its enthusiasts think it could change the world. Sure, it would make contracts more enforceable and speed up the settlement of stock trades – hence the interest from big banks. But some see it going much further, cracking down on sex trafficking, music piracy, and child labor.
And the key to all that – what attracts these different factions – is something that, on the surface at least, sounds rather banal: a digital ledger, like the one in your checkbook.
“Blockchain is a truly extraordinary technology that does really mundane things,” said Paul Brody, Ernst & Young’s global blockchain leader.
But for all the promise, these big questions remain: Who will foot the bill, and is it really as secure as supporters say?
What is blockchain?
In the non-blockchain world, we keep separate records of transactions. If you write your friend a check, you balance your own checkbook and your friend does the same when they deposit it. But things can go wrong. They might forget to update their checkbook ledger. And each bank has no way to know immediately if the person has enough in their bank account to cover it.
With a blockchain, instead of two separate checkbooks with two records of debits and credits, you’d both look at the same ledger of transactions. It’s private (encrypted, in computer-speak), and decentralized, so neither of you controls the ledger.
This “distributed ledger” operates on consensus. Both of you can look at the ledger. Each transaction gets put into a block. If you both say that block is valid and correct, it’s added to a chain. And that chain is protected by sophisticated cryptography: No one can change the chain after the fact.
Now imagine this in a more complex form. This is what gets people in finance and technology excited.
Say you want to buy a stock. Right now, your bank, brokerage, the stock exchange, and the company you’re buying all have separate, private records of transactions. They can’t see each other’s ledgers. Nor can they verify that everything is accurate among all involved.