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The Next Dot-Com Boom? How the Blockchain Works… and How It’s Changing Everything

The Next Dot-Com Boom? How the Blockchain Works… and How It’s Changing Everything

The world is undergoing a digital revolution…

By now, I’m sure you’ve heard about cryptocurrencies and, in particular, bitcoin. It’s the most well-known and widely traded cryptocurrency.

Cryptocurrencies remain somewhat of a mystery to many folks. And that’s understandable. Perhaps only 1% of the world’s population owns any cryptocurrency at all. But make no mistake: Its popularity is growing exponentially.

I need to give you only one example to show you why…

The first cryptocurrency – bitcoin – was introduced in 2009, when it traded for well under a penny per coin. Today each bitcoin trades for over $40,000, an incredible return for initial investors.

Obviously some early investors have became multimillionaires… Where else can you get a return like that?

To comprehend bitcoin’s success and the growing popularity of cryptocurrencies, you need to understand the technology behind it.

That technology is called “blockchain.”

It’s quickly developing into the 21st century’s most disruptive trend.

The Ultimate Overseer

Blockchain is at the core of cryptocurrency success. It’s the hidden secret to making money with the cryptocurrency revolution.

Here’s why…

Every cryptocurrency now in existence – and its estimated that there are now more than 1,700 different ones – uses blockchain.

But cryptocurrencies are just the tip of the iceberg when it comes to blockchain applications. Blockchain technology is poised to quickly make the leap into everyday transactions. The gains for early investors could be huge.

Let me start with a little history…

Blockchain started with bitcoin.

Because you cannot physically own bitcoin – or any other cryptocurrency – it was essential to develop a safe, secure and transparent digital ledger for every user’s account. This was accomplished by creating what’s called a global distributed ledger.

A global network of unassociated computers uses blockchain technology to jointly manage the database that records bitcoin transactions. That is, bitcoin is managed by its network of individuals, not by any one central authority.

Let me repeat that… not by any one central authority.

Currently, all digital transactions – credit cards, debit cards, store cards, gas cards, ATM cards, PayPal, etc. – have a centralized database where all the transactions and customer records are kept.

The problem is those centralized data bases can… have been… and will be… hacked or breached. The largest data breach in history (as of this writing) was at Yahoo in 2013 and it affected sensitive personal information on 3 billion accounts, every single Yahoo account that existed at the time. 3 billion is a little under half the global population! That epitomizes the problem.

Because the blockchain is a decentralized system, any hack or breach is virtually impossible. Here’s why…

The blockchain, through encryption, securely records transactions and stores them in blocks on the network of computers that have installed access to the blockchain. That way everyone in the network has an opportunity to verify any transaction they made.

The key word is “they.” If you were not a part of the transaction, you can’t tamper with it. You can modify only transactions you are involved in. And the person or persons you are transacting with must also agree to these modifications.

The blockchain uses encrypted keys assigned to all its individual users. Everyone involved in creating a new unit of crypto holds a copy of the blockchain. Each copy perfectly reflects all other copies. Each part of the bitcoin network represents the whole of the bitcoin network.

Hacking any of the transactions is extremely difficult. To hack one block of information, one would need to go through all the blocks before it in the chain.

Let’s say your transaction is in block number 2,150. To hack that one block, a hacker would need to go through the 2,149 blocks before it. Considering that the system is updated constantly, it would require not only an incredible amount of patience and persistence but access to an amount of computing power that doesn’t exist today.

This is why the bitcoin network is so incredibly secure. Unlike a central database or a central server, there’s no single source to attack. Your PC and mine, along with thousands of others that have made transactions, are essentially the “server.”

With the data breach at Yahoo, the hackers needed to break through only Yahoo’s weak encryption to get access to data on 3 billion people. The problem: The data was all stored in a central location, Yahoo’s servers. Encryption is often touted for its security but the people behind the Yahoo attack were so deep into the system it took the company three years to detect them. But a record of the blockchain – every transaction ever – is sitting on hundreds or even thousands of computers all over the globe. That’s the brilliance of a “decentralized” system.

The power – and, thus, the security – is distributed throughout the whole network evenly and neutrally.

Where to From Here?

The blockchain protocol – in the form of global distributed computations – ensures the integrity of the data exchanged among billions of devices… without going through a third party or centralized database.

Blockchain is public; anyone can view it at any time because it resides on the network, not within a single institution in charge of keeping records. Think of the blockchain as a global spreadsheet or ledger that everyone can download and run on their personal computer.

The beauty and game-changing nature of this technology is that it can be programmed to record virtually everything of value and importance to humankind: birth and death certificates, deeds and titles of ownership, financial accounts, votes, and anything else that can be expressed in code.

This potential has the business world both excited and terrified.

The fact that millions of blockchain users will be able to verify their transactions means that a third party for that is no longer needed.

Here’s an example of how this revolutionary innovation has the power to transform our financial world.

This is how a simple buy or sell transaction in the capital markets looks today…

Just look at all the steps in that process and the number of data holders and fee collectors along the way.

With the blockchain, the mess above turns into something like this…

Everything becomes simplified. No unnecessary middlemen. Everyone has access to what they did.

Here’s another example. Banks make billions on various fees: overdraft, ATM and transfer fees. According to CNN Money, banks made more than $34 billion in overdraft fees in 2017. Blockchain could take those billions away. Using the blockchain, if the money is not in the account, the transaction never takes place.

Plus, the blockchain decreases the time needed to clear transactions. By reducing the time, it lowers the costs. With the blockchain, there would be no need for the clearinghouse. That, in turn, will bring your $15 transfer fee to $2. And with increased efficiency, the $100 you deposit will be in your account and available to use the same day.

The Rush to Use Blockchain Is On

Most companies are eager to apply blockchain to their businesses and industries.

The advantages that the blockchain provides can be applied to a wide spectrum of companies and industries…

  • Instant verification/no counterparty risk
  • Transparency
  • Elimination or minimization of the need for regulators
  • Decentralized trust
  • Real-time data updates
  • Lower costs
  • Faster transactions.

Several startups are already beginning to use the blockchain as an integral component of their businesses. Some use it to make their businesses operate cheaper and faster, while others aim to eliminate fraud and nonpayment.

Blockchain is now even being used to verify authenticity of some luxury goods, which can potentially eliminate the counterfeit market.

Big companies like Microsoft (Nasdaq: MSFT) and IBM (NYSE: IBM) are working on developing software for blockchain use. Wall Street giants JPMorgan Chase, Goldman Sachs and Bank of America are trying out various implementations of this technology.

Simply put, we think the blockchain will create more millionaires than the dot-com boom ever did. And that’s why you need to pay attention to this space.

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