Welcome to the first edition of our PropTech educational series!
Starting to learn about blockchain is like trying to solve sudoku for the first time. At the beginning, it might appear complicated but, eventually, it makes sense. We are here to help with that! Stay tuned for next week as Part 2 covers Blockchain in Real Estate.
In a sentance
A good analogy
Blockchain is a digital ledger which contains a record of transactions of value ordered chronologically and publically available.
Imagine yourself and three friends have a blank piece of paper each and you all want to collect names of people who can attend a party you are hosting but you want to ensure all of you have the same list of names. The four of you all head out to collect names. When a name is collected, all four people meet up at the exact time the new name is collected, and all four of you update your pieces of paper together. You each write the time and date the name was collected, and the name itself.
This process is repeated which results in everyone having a copy of the data. If someone adds a name to the list, all of the other lists wouldn’t match so it would be obvious that the name was added and that copy of the list manipulated so it would be rejected by everyone. The same is true if any sort of change happens such as time, date or a change to the data (name) itself.
This may sound like a long process but this happens digitally and instantly and the transactions can be anything of value such financial transactions.
This makes the transactions recorded secure and cannot be manipulated or backdated as any attempted changes would not be accepted by the other ledgers that do not match up. As this ledger is also public, it means transactions can be tracked all the way back to the first ever transaction.
It all comes down to trust. Take voting in elections as an example. The process of running an election, then receiving and counting all of those votes is usually overseen by a single organisation. But there are problems with this approach. Some people have good reasons not to trust those central organisations, and data is potentially more vulnerable to hacks if it’s all kept in one place. In theory, blockchain technology allows everyone to keep an eye on what’s going on within a system, but doesn’t give any one person control over that information.
How Blockchain Works:
Click here to learn how to explain blockchain to anyone!
Who created Blockchain?
Satoshi Nakomoto- the unknown person who designed bitcoin and also devised the first blockchain database. There have been multiple claims to his identity – a Californian named Dorian Satoshi Nakamoto, and an Australian named Craig Wright claimed he had invented the cryptocurrency. Blockchain was conceptualized in 2008 and first implemented as the basis for Bitcoin in 2009.
Learn more about the World’s most
popular cryptocurrency with this handy infographic:
Useful Keywords and Terms you should know
Altcoin is an abbreviation of “Bitcoin alternative”. Currently, the majority of altcoins are forks of Bitcoin with usually minor changes to the proof of work (POW) algorithm of the Bitcoin blockchain. The most prominent altcoin is Litecoin. Litecoin introduces changes to the original Bitcoin protocol such as decreased block generation time, increased maximum number of coins and different hashing algorithm
Bitcoin is a well known cryptocurrency, based on the proof-of-work blockchain.
A blockchain is a type of distributed ledger, comprised of unchangable, digitally recorded data in packages called blocks (rather like collating them on to a single sheet of paper). Each block is then ‘chained’ to the next block, using a cryptographic signature. This allows block chains to be used like a ledger, which can be shared and accessed by anyone with the appropriate permissions.
Chain linking is the process of connecting two blockchains with each other, thus allowing transactions between the chains to take place. This will allow blockchains like Bitcoin to communicate with other sidechains, allowing the exchange of assets between them.
Consensus Process is a group of peers responsible for maintaining a distributed ledger use to reach consensus on the ledger’s contents.
Cryptocurrency is a form of digital currency based on mathematics, where encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. Furthermore, cryptocurrencies operate independently of a central bank.
Cryptography refers to the process of encrypting and decrypting information.
Ether is the native token of the Ethereum blockchain which is used to pay for transaction fees, miner rewards and other services on the network.
Ethereum is an open software platform based on blockchain technology that enables developers to write smart contracts and build and deploy decentralized applications.
Distributed ledgers are a type of database that are spread across multiple sites, countries or institutions. Records are stored one after the other in a continuous ledger. Distributed ledger data can be either “permissioned” or “unpermissioned” to control who can view it. A ledger is an append-only record store, where records are immutable and may hold more general information than financial records.
Initial Coin Offering (ICO) is an event in which a new cryptocurrency sells advance tokens from its overall coinbase, in exchange for upfront capital. ICOs are frequently used for developers of a new cryptocurrency to raise capital.
A node is any computer that connects to the blockchain network. A full node is a node that fully enforces all of the rules of the blockchain.
Smart contracts are contracts whose terms are recorded in a computer language instead of legal language. Smart contracts can be automatically executed by a computing system, such as a suitable distributed ledger system.
A token is a digital identity for something that can be owned.
A wallet is a file that contains a collection of private keys. A wallet address – cryptocurrency has send and receive addresses which acts like a home address to receive mail, but instead you receive cryptocurrency to this address. Each address is unique and represents an individual’s place on the network. A wallet address is usually a string of alphanumeric characters. Here’s an example: 0x4b231e4E66373cbC209758Cd7174f3ceBcb8869E
Why blockchain is revolutionary and here to stay:
- it is truly scalable, as it can scale the same way a torrent can to hundreds of thousands of peers;
- it has the potential to standardize the entire network;
- the security is built-in: the fact that the blockchain is distributed across tens of thousands of computers means that hacking it is almost impossible or unfeasible (in fact, this is one of the main reasons why we see such a big hype in the banking industry over the applications of this technology);
- it is transparent, as the cryptographic public address of the sender and receiver of every event is recorded, and everything is available for inspection;
- it can also offer great improvement in terms of privacy, as users are pseudonymous and can perform transactions instantly without the need for any personal authentication.
- and, finally, it has no down-time and it’s immune to censorship as no single authority has general control over it (due to its de-centralised structure). If the database of an institution or a cloud system goes down, users will be unable to perform data transactions with it, which, in many cases, can have serious consequences. With blockchain, users can have continuous, open access, without any potential risk of interruption
Getting business loans or making, and accepting, payments would cost little, or nothing. Moreover, Blockchain eliminates the need for saving copies of invoices, bills and financial statements, as it is all on the ledger. This system has the potential to make the lives of individuals, as well as business owners, much easier.
Benefits to SME’s and Start-ups
1, Reduced time spent on paperwork and admin
2, Reduced transaction fees in payments
3. Reduced disputes between you and your customers
4. Eliminates chargebacks
5. Raise capital without taking on major fees
6. Accept payments with no middleman involved
7. Store and access data in one place and share it
Five Blockchain Developments Coming in 2018
1. Asia and the Middle East will aggressively push blockchain
Interest in blockchain continues to be very high in Asia and the Middle East, where some of the largest banking institutions are forging ahead with blockchain projects or service offerings, particularly in payments.
For example, banks in Japan and South Korea have just begun testing a blockchain technology that could achieve same-day international transfers and cut costs by nearly 30 percent.
2. Cybersecurity will amplify blockchain adoption
With the rise of ransomware attacks demanding cryptocurrencies, blockchain and IoT cybersecurity will emerge with defenses based on cryptocurrency technologies.
While this may sound fantastical and futuristic, the emergence of blockchain cybersecurity tools may be the next big thing in blockchain. With major breaches such as Equifax proving that companies generally cannot safeguard current identity data systems, the need for a more secure blockchain-based identity approach, in which no one holds all the keys, will emerge.
3. ICOs will take off
There was a seismic jump in ICOs in 2017, and the ecosystem of cryptocurrencies has expanded in a huge way. In the next year, the pace of ICOs will grow significantly faster, and will overtake venture capital funding.
4. Finance and insurance will go all in
The insurance and finance sectors are two of the most likely to experience deep, and threatening, disruption from blockchain technology.
Insurance will emerge as a hot area as claims processing and complex multi-party processes like subrogation will show the business value of blockchain-based automation. And, JPMorgan will open a cryptocurrency trading desk, despite Jamie Dimon’s viral commentsdismissing the validity of cryptocurrencies.
5. Automation, privatization are coming
Blockchain will drive digital transformation of the enterprise specifically with automation, digitization of processes, tokenization of physical assets and activities and codification of complex contracts.
In addition, governance issues will continue to plague bitcoin (Segwit2x), ethereum (frozen Parity funds) and others as new challenges emerge. This will drive enterprises to “private” blockchains but will not slow down the growth of core cryptocurrencies.
Join us next week for Blockchain Part 2: Blockchain for Real Estate…