Will Blockchain Technology Power the Future of Payments?

You’ve likely heard the word blockchain. It’s been getting a lot of attention in payment technology circles for its massive potential to change computing as we know it. But what, exactly, is it? We’re going to break the concept down for you here and shed light on why we might be hearing a lot more about it.

It’s A New Computing Paradigm

While still in its infancy, blockchain technology is part of a new open-source development environment. As such, it potentially represents a major paradigm shift, as the author of Understanding the Blockchain on O’Reilly’s Radar points out, that’s similar to when web development entered the scene in 1996.

Blockchain is most popularly known as the technology protocol of Bitcoin, programmable money that’s also referred to as pseudo currency, cryptocurrency, digital currency, or virtual currency. This digital “money” uses a cryptographic block-chain data structure (hence the term “blockchain), wherein transactions are constantly updated and stored chronologically and laterally across a public ledger. Only some of the transaction details are available to the public, however; each transaction must be “signed” with a private key providing mathematical proof that the user is the owner of the wallet. (Learn more about the Bitcoin network and how Bitcoin works)

It Decentralizes Trust

Blockchain technology is built to be inherently secure—removing the need for centralized authority. The technology itself is the authenticator of transactions. The virtual network on which the blockchain resides uses consensus logic, making several independent confirmations for each transaction. The author of Understanding the Blockchain puts it this way: “…governance is very dependent on the end-users who are part-owners, part-users, and part-nodes on that decentralized network. Namely, due to the blockchain’s role as the unequivocal validator of transactions, each peer can proceed and trust one another because the rules of trust, compliance, authority, governance, contracts, law, and agreements live on top of the technology.”

It’s this decentralization of monetary transactions that make the blockchain a radical departure from our traditional management of money.

It’s Ripe with Potential

Presently, most blockchain applications are cryptocurrency related, such as those for money transfers and payments, but developers are working on ways to use the technology non-money services. As the author of Blockchain Technology Explained: Powering Bitcoin on Toptal.com suggests, “….think of [the technology] as an additional layer of the internet, a layer that can be used for authentication, signage, secure communications and content distribution, financial transactions and much more.” Programmers at companies including Microsoft and Samsung, in fact, are harnessing blockchain for Internet of Things development.

The blockchain is already changing the way application developers work, challenging programmers to solve old problems in new ways. It’s likely to be more than a just chapter in payment tech—and we’re looking out for what happens next, so stay tuned.

For more insight, read The Basics of Open Payment Technology