As the price of cryptocurrencies like bitcoin have fluctuated wildly over the last year, bitcoin, and blockchain, the underlying technology that powers it, have captured the popular imagination.
Blockchain at its heart is a distributed-ledger technology that employs cryptography to ensure the integrity of the data it stores. For all its hype, blockchain is basically just a novel approach to database architecture where control of the data is distributed among all the parties using it.
This architecture is enabled by cryptography and the use of tokens (i.e., cryptocurrencies) as incentives for participants to perform the work to ensure the data’s integrity.
What makes blockchain so disruptive is its shared ledger eliminates the need for intermediaries to establish trust and authenticate identity between two untrusted parties who want to transact. As a result, blockchain has the potential to cut out the financial middleman. In particular, cryptocurrencies are gaining traction as a form of payment for e-commerce transactions where there is a high risk of fraud and/or chargebacks. While blockchain technology can be adopted by existing financial institutions to facilitate transactions, it has the potential to enable a new set of payment rails that circumvents the existing financial establishment.
It is still unclear if bitcoin will become a lasting piece of the financial firmament or is just a passing fad.
While it has the potential to become as ubiquitous as the internet over time, there are nevertheless many issues to be addressed. As with the internet, we will probably see a mixture of both blockchain native companies as well as companies adopting the technology to improve their existing business processes and to attack new market opportunities afforded by these new capabilities. We believe blockchain is a technology that will continue to garner increasing mindshare in the years ahead.