By Jaspreet Bindra, Senior Vice President, Digital Innovation and Ecommerce,
In May 2008, someone using the nom de guerre of Satoshi Nakamoto published an innocuous paper titled “Bitcoin: A peer-topeer electronic cash system”. Every couple of years or so, someone discovers or claims to be ‘the’ Satoshi. Almost as mysterious as Satoshi was his creation, Bitcoin. Hailed as the first truly digital currency , which did not require a central mint or bank, and which could cross borders and wallets instantly, Bitcoin got a bad name when the ‘dark Net’ populated by drug and weapons dealers discovered its many uses.
The conversation today is not about Bitcoin though; it is about the underlying
which powers Bitcoin, called the Blockchain. Experts have opined that by 2025, 20% of the worlds’ GDP will rest on Blockchain based applications! Every bank and financial institution worth its salt is all over it.
So, what is this animal? The easiest way to explain Blockchain is to think of it like a cryptologicaly protected universal ledger.To maintain a ledger, we need a ‘trusted authority’, in case of the financial
-a bank.This principle exists beyond the financial world -for example, when we buy a domain name, it moves from the seller’s ledger to buyer’s ledger somewhere, and in this case the trusted authority is ICANN.
What if there was one universal ledger, where all
could put in their entries. While everyone could see the new entries, or ‘blocks’, no-one could change or tamper with them due to the crypto-protection.Every new block would enlarge this ‘chain’ of entries by one more, and a ‘blockchain’ would form. The central trusted authority would be replaced by the distributed users of the chain, each user being a node, and each node could verify a genuine ent ry or stop a fraudulent one, through consensus. This unbreakable distributed universal ledger, with a consensus algorithm governing it, and incentive system propelling it, is the blockchain.
And the first blockchain to be put into ‘production’ and used very widely is the Bitcoin blockchain. Currently , $7 billion of bitcoins have been ‘mined’, and each bitcoin can be exchanged for approx. $450, though the value fluctuates every day.
But, blockchain applications go much beyond bitcoins. The financial world has many potential applications and disruptions. Trade finance is a ripe candidate for disruption by the blockchain. There are innumerable banking use cases, where blockchain can make the intermediaries redundant – peer to peer lending, bill discounting,
payments, etc. In fact, the very purpose of existence of banks, or central authorities, is theoretically under threat of replacement by the distributed authority of the blockchain. There are applications beyond banking and finance. The government can be a huge user: all land records being on a transparent, unalterable blockchain with their provenance clearly visible. Other records like vehicles and goods sold, perhaps even Census records are great use cases.
Blockchain is the ultimate disintermediator. It is what the Internet was supposed to be. Perhaps in the 90s the best way to explain internet would be ‘that thing behind email’. The blockchain is understood the same way today – ‘that thing behind Bitcoin’. But it is much more than that. It has the potential to create a new
, new multi-billion dollar companies, a new ecosystem which will change our world.
(Views published are personal)