Blockchain appeared in the computer science industry in 2008 in the form of Bitcoin, the most popular cryptocurrency. This technology is based on three concepts: encryption which provides the security layer using hash SHA-256 functions, smart contracts to execute transactions and distributed ledger to avoid any involvement of any trusted third party in the system. With the decentralization of the ledger, there is no need for intermediaries, that in some cases impose monopoly and make huge profits. As an example, Bitcoin is not controlled by any government or bank institution. It proves to save costs because it has a sophisticated security layer avoiding any alterations, increased speed in financial transactions (no clearing mechanisms) and it is decentralized architecture, so no replication of the same data across multiple locations is needed to secure it.
Blockchain has accomplished a significant transformation in the financial sector, and it has the capabilities to disrupt other industries as well, by changing the way companies do business and how we interact with them. Registration of Intellectual property, digital voting, land or home title registration, identity management are many of the examples of how blockchain could be applied. This technology is considered as a revolutionary invention comparable to steam engine and electricity (Chung and Kim, 2016).
Among the challenges that Blockchain is facing are: many blockchain applications have not gained much attention as Bitcoin, the cryptocurrency market capitalization as of now it is 217 Billion, and Bitcoin has 114 Billion (Source: coinmarketcap.com), which shows that Bitcoin still has the majority of the market. Another significant challenge is scalability, is it possible to scale without having an impact on the environment? Many companies have large-scale data centers to mine Bitcoins that consume more energy than entire countries. Some study shows that Bitcoin transactions are taking longer to be included into the Blockchain, here are some numbers: 42% of transactions are taking more than an hour to be added to the Blockchain, and the most alarming statistic is that 20% are taking longer than thirty days. These numbers are showing an inefficiency within the network that needs to be solved. Also, this technology has the considerable challenge of solving the problem of governance, as many potential applications of Blockchain relay on government regulations and laws.
The future of this technology is still promising as it has many applications and we will see in the years to come more and more companies and government institutions adopting it as their model to operate securely.
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