10 things you need to know about blockchain in finance and financial markets Blog China Law Insight

By July 6, 2016Bitcoin Business

1. It is more than bitcoin.

Blockchain is the technology behind bitcoin but its use far exceeds digital currencies. The importance of blockchain to finance and financial markets is its potential beyond bitcoin.

2. A blockchain is a transaction record…

The “chain” is a record of transactions, each one following the one before. Ownership comes from the chain of previous transactions. A pre-digital analogy is early land title and the package of deeds showing all of the transactions which led from the original grant to the current ownership.

3. …independently verified by others…

The transactions are verified by third parties (miners) to ensure that the necessary requirements are met, for example that a seller is the owner of the thing which is being sold. This verification is done in order and bundled into “blocks” of data for a number of transactions. Once verified, these blocks are added to the chain of previous transactions, lengthening the “blockchain”. Continuing the analogy, this is like those packages of land deeds being checked by other people each time a transactions happens, to make sure that the transaction is valid.

4. …and held on a distributed ledger.

That verified record of transactions (the blockchain) is not just held in one place but held in many places at once, digitally. Each time a block of transactions is verified then it is added to the blockchain (in encrypted form) held in all of those places. This is like creating multiple identical copies of that deed package on the internet, with each of them being a “true” record of the history and current ownership. Safety is enhanced as fraudulent changes to one copy in one place is not enough to change the record. 5. To work, it does not need an open system… Bitcoin uses an open […]

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