by Pavel Romanenko and Susanne Gold
Blockchain is widely and controversially discussed because it brings nothing less than the potential for revolution. Intermediaries, control bodies and all kinds of settlement agencies could make them superfluous. Nothing is left out: Stock exchange, bank, broker, notary and even politicians. The list can be continued as desired.
But what exactly is Blockchain? And what are the opportunities, but also the risks? One thing is certain: Blockchain can revolutionize our economy and its trade routes. But let us start from the beginning – at a time when there was no currency.
Barter and coins
In the very early days, when people lived in small groups, they could get by without money for thousands of years. They exchanged goods and services with people they knew personally.
Only the exchange of goods and commodities across borders and familiar communities made money necessary as a means of payment.
Trading with strangers was insecure – one could no longer rely on the fact that the exchange would be reciprocated.
So man began to pay for goods with cash. The trust that he had previously placed in his trading partners was now in the currency. One relies on the fact that the currency retains its value and that the equivalent of the service is provided.
Already in ancient times coins were necessary to pay mercenaries of the army for their services abroad. In ancient Greece, coins were decorated with symbols and heads of gods.
Coins always had the function of communicating claims to sovereignty and power.
This is why in the Roman Empire the images of the ruling emperor were transported on coins to the last remote settlement.
Coins and money are carriers of a defined material value, but also of messages. Considering the design of the banknotes of our time, money is still a medium of information transfer.
Today Blockchain relativizes coins and notes as means of payment and communication.
Blockchain makes transactions from one end to the other possible – without intermediary institutions and persons. Just like they used to do in the bartering business.
Can secure global barter trade be achieved?
Blockchain must be imagined as a digital list of entries, which is very secure against manipulation by clever cryptography.
The data records are stored “decentrally”.
The data will not be stored centrally in various mediating institutions, as was previously the case: For example, transfer data at the bank, deeds at the notary and so on.
From gold digger to data digger
With the block chain, the continuously growing data chain is stored and synchronized at so-called “miners”. The term miner was derived from gold mining. Instead of gold, however, data is now being mined here. The miners earn by checking the entries in the block chain. For example, with the Bitcoin Blockchain they receive units of this currency as a wage.
Multiple entries are organized in blocks and linked to previous blocks. This makes the block chain particularly secure against errors and manipulation
In order to sabotage these entries, several thousand computers of all participating miners in the world would have to be manipulated in a few moments, which is extremely costly and practically impractical. Thousands of identical copies of all transactions are available at any time and can be traced as required.
Blockchain is not equal to Bitcoin
For many people Bitcoin and Blockchain are one and the same. This is not so – Bitcoin is a specific type of block chain. The block chain technology is used in different decentralized networks, which brings many possibilities for broad applications.
In the year of the banking crisis, the term “Bitcoin”, the crypto currency, first appeared under the pseudonym “Satoshi Nakamoto”. The block chain can also be well illustrated using the digital currency Bitcoin as an example.
Financial transactions of all users are entered into the blockchains. This means that it is stored there who “transferred” whom, when and how many units of a currency – e.g. Bitcoins – to whom.
Each “transfer” is stored as an entry forever in this list, in the block chain, and shared with thousands of other computers.
With the block chain, data and information no longer reside in a central storage location, but with the network participants. And this is exactly what makes profit-oriented intermediaries such as banks and middlemen superfluous.
Many application possibilities
Not only digital transfers work – other transactions are also possible. Blockchain can not only store amounts, but also information of all kinds: transport times, temperature in the warehouse, certificates of authenticity and much more.
For example, the state of Honduras has begun to use Blockchain for its property registers to protect them from fraud and forgery.
Another area of application is in asset management with the so-called cryptoassets. An asset represents an asset such as a property or security. When the asset is tied to a digital currency – a crypto-currency – the asset becomes a fraud-proof cryptoasset that is easy to acquire and difficult to manipulate. This would also allow you to acquire shares in high-rise buildings for a few euros or, together with thousands of other investors, easily traceable shares in expensive works of art.
The carefree package: “If – then” rules.
It is also possible to formulate “if – then rules” in the block chain and execute them automatically. For example, for a flight booking when the flight is registered as “cancelled” and the ticket price is automatically credited back to the account. All participants have confidence in this computer protocol, which is stored in the block chain. The technology behind it is called “Smart Contracts” and was introduced by the young genius Vitalik Buterin with the blockchain “Ethereum”.
New opportunities create new responsibilities
Blockchain technology can make the exchange of data more efficient and enable many new business models that were unthinkable in the “centralized” digital world. The downside of this technology is that now every operation must be thoroughly checked by the participant himself. If you have transferred too much money by mistake, you have no bank or intermediary who could revise it. The storage of sensitive data in the block chain would also be irrevocable and could be misused by malicious states and companies.
That is why it is more important than ever to ask yourself the questions of who is allowed to have what data at their disposal, who is to earn money with the data and where it is stored.
Blockchain is about much more than a new currency. It is about a new order of trade and property.
This technology means both for people: Freedom from intermediaries who demand a lot of money for their services and at the same time a great responsibility for their own transactions.
It’s head or tail.