Why is there so much hype surrounding Blockchain

In 2008, a white paper was published under the mysterious pseudonym of Satoshi Nakamoto. The paper outlined the protocol for a new digital currency system that would allow online payments to be sent directly from one party to another, without the need for a financial intermediary. That digital currency was bitcoin.

The following few years saw bitcoin attract immense interest from investors around the world. The underlying technology powering the currency, however, was largely ignored. Today, the situation has drastically changed. Indeed, it is now the technology - known as blockchain - that is arguably receiving more attention than the cryptocurrency itself. Indeed, much hype has been generated over blockchain's potential application - but why is this the case?

We rely on powerful intermediaries, such as banks, governments and credit card companies to establish trust for many of the transactions we conduct in our everyday lives. Invariably, we tend to automatically place our trust in these middlemen and we assume they will securely enable the successful transfer of asset ownership, establish the identities of the two parties involved in the transaction, and maintain the integrity of the transaction data.

Normally, serious issues are unlikely to arise from having such an arrangement in place. However, problems do crop up. Databases get hacked. Intermediaries make errors. A hefty "middleman fee" is invariably associated with each and every transaction. And the overall transaction process, including clearing and settlement, can take days if not weeks.

Much of the blockchain hype, therefore, has emerged because this new technology is capable of solving such problems. As we recently explained, blockchain is considered a distributed ledger technology. Instead of having to rely on intermediaries, cryptographic codes and mass consensus ensure integrity is established and can't be compromised. Someone intending to hack the system, for instance, would have to unlock the highest levels of cryptographic security, as determined by potentially thousands of network participants located around the world. And to compound matters for the hacker, he would not merely have to hack his target block, but rather the entire chain of preceding blocks - a task considered to be virtually impossible.

Such capability could have profound implications for the world as we know it. In a similar manner to how the internet opened up the world of instant digital communication, blockchain is set to provide a significantly faster and more secure platform for the transfer of assets.

Royal Mint Gold ® (RMG) is one such example. Historically, financial transactions (including gold trades) have been recorded either in accounting books, or more recently, in spreadsheets and databases. In contrast, RMG uses blockchain technology to record ownership and thus is it becomes easier to ascertain who owns the equivalent gold stored in The Royal Mint vault. As such, both transparency and security are enhanced on the RMG blockchain, while substantial efficiency gains in terms of managing and tracking the assets can be achieved.

Elsewere, blockchain is currently being tested to solve a myriad of global problems that have arisen either partially or wholly from the use of inefficient centralised entities. A few of these include:

  • Land title records - Estimates suggest that worldwide 70% of the world's people who have land have a tenuous title to it. The Republic of Georgia recently began to register land titles via blockchain.
  • Precious minerals - the company Everledger seeks to use blockchain to track features of tradeable diamonds, such as their quality, as well as to record ownership history to prevent the spread of "conflict minerals".
  • The art industry - forgery is a serious problem in the often opaque world of fine art trading. Blockchain is now being used by companies such as Verisart to provide an immutable and tamperproof record of art ownership.

Admittedly, we are not quite there yet on blockchain being the disruptive force the world is keenly anticipating. But with RMG being introduced, and a with large, diverse range of industries due to launch their own blockchain-powered applications in the near future, neither are we especially far off. For now, therefore, there appears to be much to justify the hype.

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