Blockchain is a common buzzword in the technology and business sectors, but it’s much more than a trendy bit of tech. Blockchain is essentially a digital, decentralized ledger which records and validates all transactions chronologically, permanently and, most importantly, publicly on every participant’s ledger. This means blockchain provides total transparency where each event that occurs in the system is known to all members of that system. This creates systems in which corruption and dishonesty are nearly impossible or — at the very least — require a majority of users on the system to be in collusion in order to compromise the network (which raises the question of why they’re on the network in the first place).
The blockchain innovation allows us to move to a “trustless system”, where blind belief is no longer a mandatory requirement for doing business. Fundamental to blockchain is the idea that you don’t trust any individual member of the system. A network of actors on the system work transparently and provide “proof” for every action they take—no trust required. Prior to blockchain, and even today, society requires us to have continued reliance on the promises made by our institutions. That blind faith has proven time and again to work against our best interests. It’s hard to forget that the Great Recession was caused by financial institutions fundamentally failing to live up to the faith we placed in them.
Blockchain and the trustless systems that can be created with this methodology allow for relationships in which no leaps of faith need to be made as the system provides complete, radical transparency. Blockchain replaces the need for trust with open access to verifiable proof of all claims being made within the system. It’s easy to see why blockchain has caught on so quickly and been leveraged in applications such as currency exchanges. People are growing hesitant to trust institutions like big banks and are desperate to exist with more control and independence—not to mention, avoiding another financial crisis like the one from less than a decade ago.
Currency, finances, economy—these are the most fundamental building blocks of our society and also the ones requiring the most faith and trust. So, it’s no surprise that the most viral and hysteria-inducing application of blockchain is for the creation of alternate currencies. Cryptocurrencies are stores of value that don’t rest with the good intentions of a singular, central authority. And, blockchain is the technology behind the wave of cryptocurrencies that have come in the wake of Bitcoin. The technology is being heralded as a system for decentralizing currency exchanges, removing the need for banking institutions and government-controlled currencies. While blockchain may or may not be responsible for the next revolution in currency exchanges, the technology behind blockchain has broader implications and potential applications than cryptocurrency alone.
Blockchain’s potential continues to expand as the understanding of its capabilities grows. Many industries are on the verge of major disruptions thanks to blockchain; real estate is one of these industries. Typically, real estate transactions involve a large group of actors that each have a role in the system such as brokers, agents, bankers, and insurance providers—all of whom require our trust in them for a transaction to complete. Blockchain provides an alternative system known as a “smart contract” that can cut out unnecessary complications, costs and reliance.
Smart contracts allow for transactions to be executed in a transparent and automated fashion. Transactional funds can be released immediately upon the completion of each milestone in a deal or as each step of a process is completed. Blockchain technology enables smart contracts that are viewable by everyone involved in the transaction, and self-executing upon confirmation of the legitimacy of the transaction. Smart contracts provide secure methods of ownership transfers which provide immutable evidence of the transaction and each step involved. The historical approach to immutability involved accountants writing in pen, and fixing mistakes through a ledger of corrective transactions.
This technology allows for faster transactions that are protected against fraud and negate the need for the involvement of middlemen, such as real estate agents and financial brokers. Continuing the example for the real estate market, smart contracts and blockchain could even provide detailed and unalterable records of previous transactions of each property in the system along with detailed accounts of previous inspections and renovation work.
Blockchain removes the need for trust and creates systems where everyone can feel completely secure and in control of their own affairs. The creation and maintenance of systems that are 100% transparent allows for entire societies to benefit from these trustless systems while engaging in protected transactions. The implications of this technology are vast and demonstrate that the advantages of blockchain are greater than cryptocurrency alone.
So, is blockchain inevitable? Undoubtedly. Our society is growing increasingly suspicious of cathedral-like institutions and becoming far more interested in trustless systems. It may not persist into the future in its current incarnation, but we can expect many evolutions of the technology and ever more ubiquitous applications.
Blockchain is our current and best technological answer to a world where trust is obsolete.