Blockchains or DLT technology(Distributed Ledger Technology) in general, gained a lot of eyeballs last year. The price of Cryptocurrency has been driving the headlines for much of that time but now many people are starting to understand, it’s the underlying technology that is the ‘real revolution’. But is it all just a hype?
If we look at Gartner’s Hype Cycle I believe we are somewhere near the peak of Inflated Expectations. And that’s fine because most of the new tech that is introduced and gets the level of interests that Blockchain has goes through the same cycle.
The most important things to understand
If we google “Blockchain” there are a lot of great articles explaining to us what a Blockchain is and how it’s used for various purposes. What many of them misses to really clarify are two quite simple features that go beyond the hype. For me, these features are what makes it so fun to work with the Blockchain and they are probably the reasons why you also should care about the technology.
1. The Blockchain decentralizes trust
This one is huge, I mean if we really spend some time thinking about the possible consequences this might hold for our society. Trust is something that historically is handled by different institutions, like the Central Bank, lawyers, taxi companies and many more. Our entire society is built upon the thought of dealing with middlemen to handle the highly needed trust between entities. In a Blockchain, this trust is handled in two different way.
- It’s decentralized
- It’s handled by small applications called Smart Contracts
What do we mean by decentralized?
In a public Blockchain, there are thousands of nodes spread all over the world that all handle the same data. This is quite opposite of the existing situation where one entity handles the trust. When a bank handles our transaction, this is centralized.
What is a Smart Contract?
A Smart Contract is an application deployed to the Blockchain that is run in a step-by-step mather. For example like a transaction for buying something.
2. It removes margins
Huge companies can live with very small margins since they have a very big volume on their sales. For small companies, this is not possible because everyone needs to earn money. For companies living out of being middlemen and are having a margin based on that, the Blockchain will really make problems for them.
Let’s use Amazon as an example, they make a living out of selling other people goods. And they do it with a small margin. By using a Blockchain the exact same transaction could be done directly between the seller and the buyer since as mentioned in the first point, it handles trust in a very good way.
I’m not saying that I believe either Amazon or a lot of other online businesses will be swept away by the introduction of Blockchain, but I do think that they might need to think a little different in the future.