Just as the internet enables peer-to-peer digital communications, blockchain technology enables peer-to-peer digital transactions -- the exchange of goods, services, and contracts – in a way that’s designed to be cheaper, quicker, and safer than wiring money, emailing contracts, or waiting for the reciprocal update of independent ledgers.
As Harvard Business School Professors Marco Iansiti and Karim R. Lakhani observe, blockchain technology, “has the potential to become the system of record for all transactions. If that happens, the economy will once again undergo a radical shift, as new blockchain-based sources of influence and control emerge.” 1
What is Cryptocurrency
What Distinguishes Blockchain Technology From Other Forms of Electronic Payment? Blockchain technology enables transactions without requiring a trusted third party, such as a bank, to authenticate the exchange. Blockchain instead guards against fraudulent activity such as transferring value more than once (“double spending”), through an encrypted, public digital chain of transaction records. A ledger is “replicated in a large number of identical databases…when changes are initiated in one copy, all the others copies are simultaneously updated. So as transactions occur, records of the value and assets exchanged are permanently entered in all ledgers.” 2
Who Invented Blockchain Technology, Cryptocurrency, and Bitcoin?
The concept of a functional form of blockchain technology, including the first cryptocurrency, bitcoin, was first outlined in a 2008 academic-style paper by Satoshi Nakamoto, a pseudonym for a still-unknown individual or group. The main breakthrough as the method for preventing fraudulent “double spending,” or digitally transferring an amount of cryptocurrency value more than once. Powered by bitcoin, blockchain technology went from theory to practice in 2009, when the technology was released as open-source software and users began conducting transactions in bitcoin. Bitcoin also began trading as an asset in 2010. 3
- 1 Harvard Business School Professors Marco Iansiti and Karim R. Lakhani, “The Truth About Blockchain,” Harvard Business Review, Jan-Feb 2017, https://hbr.org/2017/01/the-truth-about-blockchain
- 2 Harvard Business Review, “The Truth About Blockchain.”
- 3 Bitcoin: A Peer-to-Peer Electronic Cash System,” by Satoshi Nakamoto (a pseudonym for a still-unknown individual or group), 2008. https://bitcoin.org/bitcoin.pdf