what is blockchain?

If you haven't heard about blockchain, you probably know about bitcoin. Blockchain is the underlying technology that powers bitcoin. Experts are predicting that blockchain technology will cause a revolution similar to what the Internet provoked, changing the way we live and work. Blockchain’s potential to transform businesses in the Middle East is becoming increasingly clear today, with the financial services being the most likely sector to be disrupted. Like the Internet, you don’t need to know how blockchain works to use it. However, having a basic knowledge of this technology will be vital for those working in the tech sector, and those in the many industries that blockchain is set to disrupt.

 

what is blockchain?

In simple terms, a blockchain is a continuously growing list of records, which are linked together in blocks, and secured using a form of cryptography. Each block contains a hash pointer, a type of mathematical algorithm that links it to the previous block, a timestamp, and transaction data. Linked together, these blocks form an unbroken chain – a blockchain.

Blockchain can be thought of as a form of digital ledger, which, as Harvard Business Review notes, is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.” It facilities secure online transactions and results in a robust workflow where participants' uncertainty regarding data security is marginal.

From a technical point of view, blockchain is an innovation relying on three concepts: peer-to-peer networks, public-key cryptography, and distributed consensus based on the resolution of a random mathematical challenge. None of these technologies are new. Only when combined do they make up something revolutionary.

 

who invented it?

The first blockchain was conceptualized in 2008 by a person or group known as Satoshi Nakamoto, who implemented it in 2009 as a core component of bitcoin. Nakamoto’s blockchain serves as a public ledger for all transactions which use the digital currency. Bitcoin is known for being the first currency that solves the double spending problem without the need for a trusted authority/third party or central server, as the blockchain confirms that each unit of value was transferred only once.

 

why is this important?

Blockchains are secure by design. Once the data in a given block is recorded, it cannot be altered retroactively, without altering all subsequent blocks. This allows the participants to verify and audit transactions inexpensively, and makes blockchains potentially suitable for recording financial and medical records, or even other forms of record administration such as transaction processing, document provenance, food traceability, or identity management.

It’s been suggested by many leading publications and thinkers that blockchain is a foundational technology that "has the potential to create new foundations for our economic and social systems." Over the next few decades, blockchain technology is expected to seep into our economic and social infrastructure. Blockchain 2.0 technologies enable the exchange of value without intermediates acting as arbiters of money or of information. They are expected to enable the protection of privacy, allow previously excluded individuals to enter the global economy, provide better capabilities for royalty collection and management of intellectual property copyrights.

For example, programmable blockchains could allow individuals and companies to write sophisticated smart contracts, including invoices that pay themselves when shipments arrive or when a contractor’s job is complete, or to transfer small amounts of money overseas without paying costly fees, or even to create ownership records for music compositions, artworks, and antiques.

 

possible business applications:

 

governance.

Blockchain can make the results of any kind of election or poll taking fully transparent and publicly accessible. In the boardroom, organizational decision-making can happen on the blockchain. Company governance would become fully transparent and verifiable, in relation to the management of digital assets, equity, and information.

 

supply chain auditing.

Distributed digital ledgers could provide an easy way to certify that the backstories of consumer goods are genuine. Transparency comes with blockchain-based time-stamping of a date and location. On sneakers, for instance, that could correspond to a product number that could be cross-checked online.

 

protection of intellectual property.

Blockchain has already been used to create a peer-to-peer music distribution system. Mycelia enables musicians to sell songs directly to audiences, as well as license samples to producers and then divvy ups royalties using smart contracts. The capacity of blockchains to issue payments in fractional cryptocurrency amounts suggests this use case has a strong chance of future success.

 

smart contracts.

Distributed digital ledgers enable the coding of simple contracts that will execute when specified conditions are met, for example, salary payments and the purchase of goods and services from other firms.

 

stock trading.

The potential for added efficiency in share settlement makes a strong use case for blockchains in stock trading. When executed peer-to-peer, trade confirmations become almost instantaneous, as opposed to taking three days for clearance. Potentially, this means intermediaries such as the clearing house, auditors and custodians will no longer be required.

 

the sharing economy.

By enabling peer-to-peer payments, blockchain opens the door to direct interaction between parties. This would render companies such as Uber and Helpling virtually useless, and a truly decentralized sharing economy would result.

 

file storage.

Decentralizing file storage on the internet brings clear benefits, as distributing data throughout the network protects files from getting hacked or lost. Inter Planetary File System (IPFS) makes it easy to conceptualize how a distributed web might operate. Similar to the way a bittorrent moves data around the internet, IPFS gets rid of the need for centralized client-server relationships (i.e., the current web).

 

  

More and more businesses in the Middle East are hiring staff that can help with blockchain research and development. Randstad MENA has assisted many companies in the UAE, including banks and fintech start-ups, find qualified professionals with experience needed to make a difference. Get in touch with us today to find out more.


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