Blockchain technology emerged as one of the hottest subjects of 2015, as major banks, corporations and even governments began to weigh in on the technology that makes bitcoin work.
Pete Harris, Principal at Lighthouse Partners, answers some key questions about blockchain and where it is headed this year.
The blockchain term has become much used over the past few months. So just for those who may not know, what is it and how is it related to bitcoin?
Block chains are fully distributed data stores, which contain data that is immutable – so that once a data item is written to a blockchain it cannot be changed. This level of distribution and security is achieved using internet communications protocols and complex cryptographic techniques.
The bitcoin cryptocurrency is the most well known example of blockchain technology. With bitcoin, two individuals who might not know one another at all can exchange money directly, with no third party bank or payments service involved, and the receiver has absolute confidence that the sender owns the money that it is sending. Anyone, anywhere in the world, can send and receive bitcoins if they have an internet connection and some free, open source, software for their computer or smart phone. For this reason, bitcoin’s blockchain is characterised as a Public Blockchain.
So is it necessary to buy bitcoins in order to use blockchains?
No, blockchains come in many different designs and work in different ways. The cryptographic technique that powers the bitcoin blockchain – it’s known as Proof of Work – employs high power transaction processing nodes that secure transactions by performing complex math problems. Proof of Work – which rewards its transaction processors with an amount of bitcoin per transaction – is very good at providing a key benefit for bitcoin, which is allowing 2 individuals […]
