There has been a lot of discussion recently about a relatively new form of transactions: cryptocurrencies, and particularly Bitcoin. We all have somehow read and heard about these. Most of us are mainly concerned whether cryptocurrencies are a bubble or some kind of fraud. However, it is important to note that there are people and organisations already using this truly revolutionary technology which is behind Bitcoin. What is it, how important is it and how can it affect our everyday life?
Bitcoin is based on Blockchain technology (and logic), which is in plain words and as its name states, a chain of blocks (sequential set of transactions).
The Blockchain concept is however very difficult to be explained and even harder to be defined in simple terms so that it can be easily understood. In an effort to decode the Blockchain concept, we can argue that Blockchain is a public digital directory or accounting ledger, which includes all transactions that have been executed and recorded in a particular pattern or set of transactions.
The first block of transactions, called the genesis block, is constantly added with new blocks, as soon as the transactions are completed, thus the chain is always growing. The blocks are added in a linear, chronological order and each block is linked to the previous one so that the chain cannot be altered.
Essentially, the chain (and the data included within) is a shared and universally accepted database. Blockchain's database is being serviced by thousands of computers simultaneously, and the chain is directly accessible to everyone online at the same time. This operational model - no single central location - makes the blocks public, verifiable and, until today, uncompromised by cybercriminals.
This decentralised operational model is what makes Blockchain so revolutionary – it exists on everyone's computer at the same time! The blocks are posted by people (miners/validators) who have been randomly selected based on certain criteria and are paid for these services. The whole ecosystem encourages the submission of valid and correct information, since the selection of such people is also based on their track record. People who post invalid or incorrect information face financial consequences and their chances of being re-selected in the future are diminished. When the chain is updated with new blocks, each user in the platform must agree that the information posted is as it should be. This ensures that the blocks contain valid and correct information.
The users can access Blockchain through a unique access code allocated to them initially - the access code does not contain any identification features in order for anonymity to be preserved. If the access code is lost, the user cannot connect (at the moment there is no mechanism to replace the code).
This operational model enables the chain to track and access data stored within the blocks, making Blockchain a theoretically safe technology which is already changing the way activities are being carried out in finance, education, health as well as in business in general.
With more and more people and businesses getting involved into the Blockchain technology, it is just a matter of time utilising such technology in more private matters. For example, imagine that you have undergone a series of various medical examinations and check-ups, each one with a specialised doctor. You keep all the records of the examinations, check-ups, results and other relevant documents, and you visit your personal doctor for final diagnosis. All this documentation could have been uploaded directly by the doctors into your personal account of Blockchain technology. Upon your visit to your personal doctor, you could provide him with access rights to view your personal information. In this way, the doctor could have access to the whole medical history of the patient making it easier for him to carry out a timely and accurate diagnosis. Errors, omissions, as well as decisions based on incorrect information, could be avoided. Furthermore, insurance fraud could also be reduced, since the actual examinations along with the accompanied relevant documents will be readily available through this technology to everyone (provided that access is granted by the patient), without the risk of tampering. The medical records are thus becoming safer since their exposure to unauthorised persons is significantly reduced.
There are currently a number of companies and enterprises that invest and use this technology, because they have realised the huge benefits (mostly financial) it offers. This technology can be used in specific business fields as well, for example in the identification procedures, collection of personal data and verifying clients’ wealth to name a few. Blockchain could additionally help the efforts towards the reduction of fraud and corruption, since, theoretically, all relevant information is readily available and already validated.
We can safely and easily conclude that Blockchain technology is here and it is expected to stay for a long time. This technology is already making our lives more comfortable without us even noticing. It is expected to influence our lives much sooner and with greater impact than anyone has ever imagined.
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Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.