Over the past few years, Bitcoin has garnered lots of press for a number of reasons. Some of them (such as the association with Silk Road) were less wholesome than others. But Bitcoin is really just a currency like any other and is neither good nor evil on its own.
The real game changer with Bitcoin isn’t Bitcoin itself, but rather a technology underpinning the virtual currency called blockchain.
In the simplest of terms, blockchain is a globally distributed, highly secure, distributed ledger. Rather than keeping data about transactions and balances in a centralized (and vulnerable) place like banks and clearing houses, blockchain stores such records globally across millions of computers using anywhere from 10-100x the computing power of Google.
Here’s a 2-minute primer put together by the World Economic Forum:
So What, Who Cares?
Financial services firms, for one. Think about what they do. For a fee, they typically offer things like:
- Authenticating and attesting to value
- Transferring value
- Storing value
- Lending value
- Exchanging value
- Insuring value and managing risk
- Accounting for and auditing value
What should worry those institutions is that blockchain can manage most of those tasks at a fraction of the cost to the user, and accomplish them in a fraction of the time. Billions of dollars of fees could evaporate as consumers seek lower cost alternatives and better performance. Financial services firms as a whole have been stagnant for a long time, and blockchain appears to be the next big market disruptor.
Some of the more innovative organizations like Northern Trust are already experimenting with it to stay ahead of the curve. What will such innovative firms accomplish? The goals are simple but the impacts are enormous:
- Reducing settlement times (and thus cost) of transactions from days or weeks to minutes
- Reducing the risk of bad actors compromising customer data
- Elimination of the double spending problem native to digital currencies
Blockchain’s impact goes beyond financial services. Think about any industry that relies on the integrity and security of data. That includes health records, tax records, voting records…the possibilities go on and on!
Why is Magenium so Interested in Blockchain?
Right now Magenium has a number of different projects that have been in the R&D phase for several months. While we can’t go into the specifics of the applications we’re building, they’re significant enough that we have a number of resources dedicated to making them real. The key functionality we’re focused on is secure message transmission for highly sensitive data, which will eventually be used for the public good.
Cool Story. But is it Secure?
As we mentioned earlier it’s highly secure. But how secure?
Traditional internet security relies on Public Key Infrastructure (PKI) to secure emails, messaging apps, and websites. Most of the time PKI relies on centralized third parties (IdenTrust, ORC, etc) to manage certificates for those services, which provide a single point of failure. When those get compromised and spoofed, this is often the origination of the man-in-the-middle attacks which you’ve seen plastered on front page news.
Blockchain gets around this problem by removing those central authorities from the picture, and uses the blockchain itself as a distributed ledger of domains and their associated public keys. With those values hashed and stored across millions of computers, the single point of failure is eliminated. We could go much deeper into security but that’s worth a real conversation if you’re interested in it.
What Can I do About It?
It is still very early in the Blockchain game, but as you’ve seen with Bitcoin the technology is already exploding. So, if you’re looking to ride the next technology wave to better profitability, contact us and we’d be happy to talk about how to take advantage of it.