What is Blockchain?
The blockchain is a shared database technology that directly links the consumer and supplier of a transaction. Digital contracts are an example of an application that is currently causing a stir.
The blockchain as a digital register
Literally translated from English, blockchain („chain“) means as much as „blockchain“ – in this case a chain of transaction blocks. The blockchain could be seen as a digital register recording transactions between a consumer and a supplier.
The resulting online network is managed by several computers – the participants in the transaction. Before a transaction can take place, it must be confirmed from each computer. Encrypted, of course, to ensure the security of the transaction. Then everything joins together to form a chain and is converted into a computer code.
Blockchain: More transparency for more security
The blockchain is a kind of transparent database: In a „digital account statement“, even the smallest details of a transaction are recorded and can be viewed by the members of the network. Through this process, the blockchain enables unprecedented transparency between the individual transaction partners.
Blockchain makes central instances superfluous
The blockchain is the same system on which the Bitcoin crypto currency is based. However, there is one major difference that draws the attention not only of Fintechs but also of established institutions, banks, central banks and financial regulators to the potential of the blockchain: While it used to be a general ledger responsible for managing all the details of a transaction, it is now replaced by the described transparent database. Any information captured by the system is verifiable. The need for a central authority to guarantee the authenticity of the data is therefore eliminated.
The blockchain makes information verifiable – and thus forgery-proof.
This is the real added value of the blockchain: Verified information to which every participant of a transaction has access, i.e. which is managed simultaneously by several computers, is virtually impossible to manipulate.
The absence of an intermediary instance not only ensures more secure transaction traffic. Consumers and suppliers benefit from an accelerated processing speed. Share transactions and the like are optimized many times over.
The Smart Contracts of the Future
This application example is currently electrifying the banks and the entire financial services sector: we are talking about smart contracts, those digital, software-based purchase contracts which, according to experts, have the potential to save billions.
And this is how it all works: Based on the „if-then-principle“, the Smart Contracts carry out corresponding measures of the contract, which are linked to conditions laid down in the contract. Without the presence of a mediating authority, the individual contract partners are in constant exchange with each other by communicating digitally via the blockchain.