How Blockchain Works and Why It Matters
MIN READNov 3, 2017 | 17:44 GMT
(KAREN BLEIER/AFP/Getty Images)
Disruptive technologies such as blockchain will impact future economies and societies just as surely as industrial manufacturing did in previous centuries. Though new developments in materials, computing, automation and related technologies may not have an explicit impact on our quarterly or even our annual forecasts, their mid- to long-term implications are manifold. Much as industrialization led to global inequality, however, future technologies could actually fuel unrest in certain parts of the world, especially as markets move away from the kind of low-end manufacturing seen by many developing countries as a clear-cut way to achieve economic prosperity.
Distributed ledger technology is the truly revolutionary development that enables cryptocurrencies to function.
The technology that anchors bitcoin, known as the blockchain, was the truly revolutionary development. Commonly referred to as distributed ledger technology, blockchain is already considered to be a disruptive technology and will affect a number of different industries beyond the financial sector, including but not limited to shipping and logistics, aerospace and defense, retail, health care, and manufacturing.
In the case of digital currencies such as bitcoin, which pioneered the technology, transactions are recorded in a shared public ledger — the ubiquitous blockchain. The currency (or contract or other exchange of information) is not controlled by a central entity like a bank but is instead managed by an online community. Members with powerful computers are encouraged to maintain the transactional register by "verifying the blockchain" — in other words, by solving complex mathematical equations and adding another "block" of transactions to the existing chain. With bitcoin, the process is known as "mining" because the verifier is rewarded with new bitcoins.