Blockchain technology is hard to understand and even harder to predict. But given the promise of blockchain and its golden child, Bitcoin, you’d be wise to start making sense of it now. For the uninitiated, this recent article from the MIT Sloan Newsroom sheds helpful light on these intertwined terms. We’ve also blogged about crypotechnology previously, in posts related to Bitcoin’s role in digital strategy and its meteoric rise in value in 2016.
The MIT Media Lab's Digital Currency Initiative describes blockchain as a decentralized public ledger of debits and credits that no one person or company owns or controls; its users control it directly. This system lets people transfer money without a bank, for example, or write simple, enforceable contracts without a lawyer.
“Blockchain technology is particularly useful when you combine a distributed ledger together with a cryptotoken (as in Bitcoin),” explains MIT Sloan Assistant Professor Christian Catalini. “Suddenly you can bootstrap an entire network that can achieve internet-level consensus about the state and authenticity of a block’s contents in a decentralized way … This is one step away from a distributed marketplace, and will enable new types of digital platforms.”
Blockchain and business
Blockchain and cryptocurrencies have enormous potential impact on global enterprises.
When Bitcoin was introduced in 2008, the Internet saw the effects of a drastic reduction in the cost of verification and the cost of networking. “For the first time in history, value could be reliably transferred between two distant, untrusting parties without the need of a costly intermediary,” writes Catalini in a research paper on the economics of blockchain.
Blockchain technology could also mean greater privacy and security for businesses and their customers. Blockchain has the capacity to make transactions more secure by increasing transparency about sellers, buyers, and supply chains, increasing the speed of transactions, and by providing built-in recourse for unfulfilled contracts. In his paper, Catalini writes, “While this is still an active area of research, new protocols are being developed to obfuscate transaction data, offer full anonymity to users, and implement different degrees of access to transaction information.” Distributed ledgers, secure identity mechanisms, and end-to-end encryption have the potential to revolutionize applications ranging from smart contracts to supply chain management, automation, and artificial intelligence.