Editor’s note: This commentary is by Norman B. Solomon, a retired businessman and CEO and former director of the World Economic Forum in Geneva. He is now the co-owner of Windmill Hill Alpaca Farm and Artisanry in Brookline.
[B]lockchain technology has been described as a Cambrian upheaval creating an entirely new approach to trust and security, impacting every aspect of private and public sector activities. At the recent Davos Symposium of world leaders, the blockchain was predicted to have a greater impact on the global economy than the internet.
Blockchain is a publically available computer program used to build applications able to solve previously intractable problems. Business transactions (transferring value in the form of digital currencies or assets) are grouped into blocks using advanced mathematics and cryptology. Each new block is linked to the previous block forming an impenetrable “chain.” The evolving chain is replicated on thousands of computers around the world, all dedicated “users” of a particular blockchain application. Any nefarious attempt to modify a transaction will automatically be rejected by the system. Miscreant activity is statistically impossible to achieve in a blockchain database resulting in the highest possible level of security. The globally distributed database also eliminates the possibility of system failure since there is no single point of failure. The diverse and independent network of users (nodes) validate new transactions by consensus, thus ensuring the integrity of the database.
With data immutability, blockchains enable a permanent historical record of every time stamped transaction, enabling foolproof authentication without the need for “authenticators.” Historically, executing a transaction via a series of “third party enablers,” implicitly required a degree of trust. Blockchain eliminates the intermediary replacing the need for trust with advanced mathematics and cryptographic proof. No single person owns, manages or controls a full blockchain network, eliminating the need for trust.
Sidestepping its complex technical underpinning, blockchain’s new contribution to the world is easy to understand. What remains confusing is differentiating between blockchain and bitcoin.
Bitcoin, a virtual currency or cryptocurrency, represents value expressed digitally. Worldwide there are over 250 virtual currencies, (www.livecoinwatch.com). Blockchain is the platform or computer program that creates the database required by the bitcoin application. The relationship between bitcoin and blockchain is analogous to email and the internet. Email is an application run on the internet. Bitcoin is a cryptocurrency application run on THE Blockchain. “THE” blockchain refers to the original, public, immutable database containing ALL worldwide bitcoin transaction blocks (517,285 blocks) since inception – Jan. 3, 2009..
Today, there are hundreds of applications that use blockchain technology, notably in the banking, legal and supply chain domain. It opens new opportunities for the the poorest nations as major intermediaries are bypassed especially financial institutions that perform clearing functions for international fund transfers or agencies that transfer land ownership.
Given Vermont’s propensity for innovation, it might be worth introducing these ideas at the high school level, keeping Vermont one step ahead of the game as the economies of the world begin to adopt blockchain technology and the inevitable introduction of cryptocurrencies.
