What came first, the Bitcoin or the blockchain?

From Token Authority

Riddle me this: What came first, the Bitcoin or the blockchain?

Blockchain became a buzzword in 2017 because investors drew the connection between the groundbreaking technology and Bitcoin — the world's first digital token.

Put simply, blockchain is the incredible technology that allows Bitcoin — and most of its digital currency peers — to operate and provide value to our global economy.

That being said, very few Bitcoin investors know what blockchain is. And that's a problem. If you’re investing in something, you need to understand what gives that item value.

And for digital currencies, their values often stem from the unique properties made possible by blockchain...

So, What Is Blockchain?

 A blockchain is a powerful, distributed, and often decentralized ledger of information.

Blockchains can be either public (like the Bitcoin blockchain) or private (like IBM’s security blockchain). They can also be centralized (controlled by one party) or decentralized (controlled by multiple parties).

Blockchain technology has the potential to disrupt multiple industries, including but certainly not limited to:

• Health care
• Real estate
• Patents
• Finance
• Cybersecurity
• Music
• Shipping
• Energy
• Artificial intelligence (AI)

That list just goes on and on...

With that much disruption, we're looking at a lot of potential profit — both for the small nimble companies that work with blockchain and the large giants that are providing blockchain tools.

It's estimated that the blockchain industry will grow from $411 million in 2017 to $7 billion by 2022. That's a staggering compound annual growth rate (CAGR) of 79%.

In specific industries, blockchain technology is already saving money. Reutersreports that using blockchain could save banks $12 million a year.

But how does a blockchain work? What gives it this ability to boost efficiency and improve multiple industries?

Let's take a look...

How Blockchain Works

Now that you know what a blockchain is, it's time to look at how it works.

Blockchain technology revolutionizes the ways in which we store and manage data by making sure that information is safe, accessible, and exchanged more efficiently than ever before.

To explain further, we have a picture:

In the image above, you can see how a blockchain-based system compares to our current systems.

The theme should be obvious: In our modern systems, we have to go through a middleman to get anything done.

If you call an Uber, you go through the Uber company. If you send money to a friend through PayPal, you go through the PayPal company. If you send money to your grandmother overseas, you go through a bank.

Those examples are fairly basic, but they prove that we live in a world ruled by middlemen. And those middlemen have a cost. Uber takes a cut of what you pay the driver, and the bank certainly takes a cut when you send money overseas.

Blockchain eliminates the need for those middlemen.

Blockchain technologies allow peers to trade information and data with each other while knowing that their exchange is secure. Blockchain can also be coupled with other technologies, including AI, to make sure information is being moved efficiently. We talk a bit more about these kinds of applications in our blockchain education page.

For now, let's look at a public blockchain example. Say hello to Bitcoin...

Using the Bitcoin Blockchain

Before we dig into this example, I want to state a few things. First, the Bitcoin blockchain is a public blockchain. That means certain information on it is available to all users. This means the Bitcoin blockchain is different from private blockchains that are developed by companies. However, it's a good example of how blockchains can remove corporations.

Let's get started...

Say you want to send your grandmother some money. You could go to the bank, but you know you'll have to pay a fee.

So, you decide to send your grandmother Bitcoin instead.

You can send Bitcoin to your grandmother without going to a bank or any mediatory party. That information is then stored in the Bitcoin blockchain, which is public and visible to everyone.

Though people can’t see your name tied to the transaction, they can see the electronic wallet.

In a perfect digital currency world, this transaction would have happened instantly. Bitcoin's transaction speed is slower these days, but there are plans to rev things back up.

Other currencies also operate on a similar model. This includes Ethereum, which has a transaction time of two minutes.

To the economic world, Bitcoin is vastly valuable. It frees global citizens to exchange money without changing currencies, dealing with fees, or waiting for banks. It also provides a system of trust that relies on computers rather than people...

In a Nutshell

Without taking up any more of your time, I just want to close the third email in our educational series on this note...

Blockchain technology is incredible.

It can be used to improve so many of our modern systems — from energy to finance. In 2017, companies came forward to start using blockchain to monitor solar power, allowing neighbors to share solar energy. Other companies came forward to tackle the internet, attempting to use blockchain to end our reliance on massive internet corporations.

We're looking at a technology that could change our internet. In fact, many people believe we're looking at the internet 2.0.

We discuss many of the companies that are working with blockchain in promising ways in your Token Authority weekly mailings.

In your next mailing, we'll talk about a few of these companies and how they came onto the market. I'll talk to you then.

Alexandra Perry
Managing Editor, Token Authority