Since You’re Asking: Here We Explain Confusing Stock Market Terminology – And How You Could Profit From It…This Week – Blockchain
What is Blockchain?
A blockchain is an online ledger that stores information that is “distributed” or shared across a network of computers.
There should be many applications for this technology which provides decentralized and secure recording of transactions. Indeed, in theory, its potential should be limitless, and billions of venture capital have been poured into this bright future.
Digital Links: A blockchain is an online ledger that stores information that is “distributed” or shared across a network of computers
But, at present, blockchain is best known for its key role in systems for buying, selling, and storing cryptocurrencies such as bitcoin.
Blockchain is also used in NFT systems. They are non-fungible tokens or digital works of art.
The most famous of these is The Merge, by an anonymous artist called The Pak, which sold for $91.8 million a year ago.
What other uses could the blockchain be intended for?
Much has been made of its power to disrupt traditional payment systems for stocks and other financial assets.
The world’s major banks aspire to substitute blockchain for their current, expensive and cumbersome international payment systems, for example.
One of the main attractions of blockchain is its status as a “trustless” network, supposedly not because participants don’t trust each other, but because they don’t have to, blocks being “immutable” or inviolable.
To date – probably for lack of other opportunities – people looking to harness the potential of blockchain have backed cryptocurrencies.
Some have made a fortune: the price of bitcoin reached $68,000 in November 2021. But it is now at $16,582, largely due to the recent collapse of crypto exchange FTX.
How does the blockchain actually work?
Usually, data in a database is structured in tables. But in a blockchain, data is structured in blocks which are strung together in a chain.
When a block detailing a transaction is added to this chain, it receives an exact timestamp.
As a result, the information is permanently recorded – and should be visible to everyone since the register is decentralized.
Did a single person invent the blockchain?
Not exactly. Two American scientists – Stuart Haber and W Scott Stornetta – came up with the idea in 1991. Later they entered into a collaboration with Satoshi Nakamoto.
This is the pseudonym of the person (or people) who would have developed bitcoin and formed the first blockchain database. To date, attempts to uncover the true identity of the individual, or team, involved have proven unsuccessful. Haber and Stornetta are definitely real people.
Why do we hear so much about blockchain these days?
The collapse of FTX, once a $32 billion company, has severely shaken confidence in bitcoin and other cryptocurrencies.
It has also shaken confidence in the blockchain, although the failure of FTX largely appears to have been caused by large-scale fraud.
So the outlook for blockchain is bleak?
Actually no. Governments around the world are planning to launch their own cryptocurrencies, with Venezuela having already done so.
The Bank of England is exploring whether to launch a central bank digital currency based on blockchain technology.
It could be part of the post-Brexit reforms for the City, unveiled at the end of last year by the chancellor. This currency would be used to pay for things online or to transfer money to other people.