Because it’s still relatively new, most consumers – and marketers – probably don’t have a clear understand of bitcoin. But it’s really the blockchain – the technology underpinning the digital currency – that could have a huge impact on financial and consumer markets.
Gil Luria, a financial technology analyst with Wedbush Securities, estimates that 20 percent of U.S. GDP – about $3.6 trillion – is generated by industries that could be disrupted by blockchain technology. And Aite Group, a market research consultancy, predicts that capital markets will spend $75 million this year alone on developing blockchain technology, reaching more than $400 million in four years.
So what exactly is a blockchain? In brief, it acts as a globally-distributed ledger that logs transactions.
Here’s one concise explanation from Re/code:
“A blockchain is essentially a record of digital events – one that’s “distributed” or shared between many different parties. It can only be updated by consensus of a majority of the participants in the system. And, once entered, information can never be erased. The bitcoin blockchain contains a certain and verifiable record of every single bitcoin transaction ever made.”
Regardless of what you think about bitcoin, the blockchain itself has so far worked flawlessly, enabling strangers, notes Re/code, “to hold and exchange digital money in a completely transparent way – without having to trust each other or any central authority.”
And here’s one real-world example – when someone uses bitcoin to buy a cappuccino, the transaction is recorded on a ‘block,’ or a file of data. Once a block is full, the next block created includes computer code that refers to the preceding block. The result is the blockchain – a permanent string of records.