The Transformative Applications of Blockchain Innovation
The Blockchain Innovation Challenge is an initiative initiated by PricewaterhouseCoopers and managed by IBM, to foster innovation in the financial services industry. The initiative is designed to encourage technological innovation at all levels of an enterprise from product design to executive coaching and mentoring. This challenge also encouraged teams from various sectors to articulate a shared vision and design pilot projects that address the following topics:
The distributed Ledger. Distributed Ledger is a generic term for a number of financial services areas. Distributed Ledger is used to describe the process by which ledgers are maintained in a network without the interference of end users. This implies that all parties involved in the transactions can view the ledger at the same time, without compromising confidentiality and availability. Distributed Ledger comes in the form of IP-based private networks (Ledger Islands), which run on mainframe computers.
The bitcoin protocol. The bitcoin protocol (which is also referred to as ‘bitcoins’) refers to a suite of digital, open-source software developed as an alternative to the traditional peer-to-peer file sharing formats. The bitcoin project was initiated by an individual known as Bitcoin Nakamoto, who continues to maintain control of the system through a self-appointed team of developers. The main objective of the project is to facilitate instant global payments, without the use of bank-based banking relationships, by providing a platform that allows users of the Blockchain Innovation to transact directly with each other.
The virtual currency. The idea of creating a virtual currency is the core idea behind the bitcoin initiative. According to its developers, a digital asset (the bitcoins) can be created and traded just like any other traditional currency. This virtual currency, however, has no direct bearing on the performance of the physical cash in a particular user’s hands but instead serves as a means for users to purchase goods or services from other internet users.
The use of smart contracts. One of the main attractions of the bitcoin initiative is the potential for it to revolutionize the way that normal, conventional, business-to-business transactions take place. Through the use of smart contracts, a new virtual economy could emerge, one based on the efficiency of peer-to-peer trade. The idea is that two or more individuals involved in a transaction may agree to enter into a contract that gives the other party certain rights and responsibilities. The smart contract could, for instance, give the seller the right to sell the buyer his goods at a set date in the future, while also giving the buyer the right to buy those goods from another seller at a set date in the future.
The use of electronic messaging as a tool for secure communication. The major benefit of using e-mail as a means of transaction is that it is not vulnerable to illicit elements such as spam, which has been the cause of many server crashes and hacker attacks in the past. In fact, some experts believe that the most secure way to make secure transactions is through the use of e-mails. The ledger that acts as a link between the buyers and sellers in the online market is known as the e-mail address to log, and the history of each transaction is kept in the electronic mail address log.
The establishment of the transparent marketplace. This is perhaps the most well-known of the transformative applications of the bitcoin system. If businesses are able to move transactions directly off of the digital ledger to another party without worrying about third parties getting involved, the cost of these transfers can drop significantly. This is one of the biggest reasons why the price of e-books has been dropping over the last few years. The major advantage of this system, of course, is that anyone can use it regardless of whether or not they have access to a computer with internet capabilities.
The establishment of a viable business model for those who use the internet. If you think about it, nearly every business transaction you make these days involves using your credit card, checking your bank account balance, or going through an ATM. As mentioned previously, the virtual currency used in the bitcoin system makes it extremely convenient to do these things because they don’t involve the traditional building blocks that are needed in order to accomplish them on a physical level. There are literally hundreds of uses for the bitcoin network and one of the most interesting and most exciting of these is the possibility of transforming the way that traditional companies make and manage their money.