BLOCKCHAIN - WHAT IS IT?

THE BASICS

You have probably heard of the digital currency Bitcoin because of its headline-making and extremely volatile valuation against the U.S. dollar in recent months. But what you may not know is how it works or why it’s so groundbreaking. In case you’re not yet a cryptocurrency-trading-millionaire, what makes Bitcoin possible is the revolutionary software technology upon which it is based, known as blockchain. The blockchain-based idea for Bitcoin was first released in 2008 via a whitepaper, “Bitcoin: A Peer-to-Peer Electronic Cash System,” by an author known by the pseudonym Satoshi Nakamoto. Since then, others have developed Nakamoto’s idea by creating blockchain, the electronic system that ensures the security and integrity of the electronic data that make up Bitcoin and other, similar digital currencies.

Blockchain is what’s known as a “distributed ledger technology” – essentially a big, shared database, constantly reconciled and updated so that every copy of that ledger is the same and is reconciled. These blocks of digital information are not stored in any one location, but rather on millions of computers all at once, which all agree on each block of transactions in the chain. Thus, no single, central location houses the data, and no governmental entity issues the currency, in theory making blockchain a safer way to transact anything of value and less vulnerable to both hacking, manipulation, and the myriad political factors that can influence the relative values of more traditional currencies.

Blockchain technology is consensus-based, so every computer on the blockchain network verifies that each block is valid and accurate before adding it to the chain. Once a transaction has been added, its electronic record becomes an incorruptible, unchangeable, and a public record of that transaction, which exists forever on that block of the chain. This technology also means that it’s transparent – every computer on the network maintains and can see the record of the transaction.

It’s certainly still the Wild West when it comes to blockchain. We’re some ways off from full enterprise-level development and adoption, and we don’t know exactly what that will look like when the time comes. But it is imperative that Maryland play a significant role in shaping this next phase of the technology. Seek to actively learn about this new technology so that you can participate in its development and application. New technology means opportunities to get in on the ground floor and have an impact on early development.