Cryptocurrencies and blockchains are changing the way we protect our data. Here’s why that’s exciting!
If you’ve read about Bitcoin or other digital currencies out there, then you know what a cryptocurrency is. Cryptocurrencies only work because the details of the currency are heavily protected – and that’s great news for the rest of use who want to protect more traditional business data. Here’s how it works.
The Power of Blockchain
While there are many cryptocurrencies with a lot of different approaches, they all focus on data encryption: Without encryption to protect their digital currency, the efforts here don’t amount to much. The reason that cryptocurrencies have suddenly become so popular in recent years, starting with Bitcoin, is that blockchains were created to provide usable encryption for money that only exists in ones and zeros.
The idea behind the blockchain is simple: Every transaction where a cryptocurrency is used or produced is processed or “mined” using a combination of encryption software and hardware. The exact details, timing, amount and everything else is carefully noted, broken up into encrypted pieces, and then added to a vast online ledger known as a blockchain. Much like an incredibly complex puzzle, the blockchain encryption cannot be altered with pieces that don’t fit, so a transaction can’t be changed once it is finalized. By recording the cryptocurrency like this, it stays safe enough to use…increasing confidence in the cryptocurrency so that more people are willing to use it.
But this leads to a very interesting thought: If blockchain encryption can do this with cryptocurrencies, why not do it with regular currencies too? Why not do it with all sorts of investments and transactions so that their details can’t be altered? And that brings us to the new uses for blockchain technology.
Unity of Records
The first benefit blockchains bring to the traditional financial world is a single, universal ledger that is trustworthy enough for all parties to consult. Think about the times that you or your business has had an argument with banks or other financial organizations. A vast number of these issues are caused because one set of records says one thing, and another set of records says something different. Sometimes the issue is an error, a delay in processing, or just human stubbornness, but it’s always about two different views.
With blockchain technology, the parties use software to automatically encrypt and encode the details at the same time, in a single ledger that everyone refers to. That means there are no longer different accounts to compare, and no issues of delays or accountability.
Changing the Way Insurance Works
All right, we’ve talked about a basic bank transaction (say, cashing a check), but blockchains can be used for far more than just that. One example is insurance: Say, for example, you ensure a valuable piece of equipment at work. A blockchain can allow you to create a digital asset that represents all the important information about that asset, along with its owner, encoded in an encrypted state. This allows you to provide an accurate description of the object to the insurance company which both sides have trust in, thus making it easier to get insurance, and much easier to process a claim. The benefits also extend to buying or selling that piece of equipment, in which the description can be passed on to a new owner.
Data Storage Possibilities
All right, so the qualities and the titles for physical objects can be transcribed into a blockchain. But why stop there? Why about encryption all valuable business data through a blockchain? By its nature, a blockchain is far more difficult to hack and assemble into sellable data than other storage methods, so hackers have very little to gain by going after blockchains.
This is why we are already seeing vendors offering storage options via blockchains. If this trend continues, blockchains could become ubiquitous when it comes to protecting consumer data: New encryption techniques are always valuable, especially during their first stage of adoption.
For more information about the latest ways to protect your Sydney data, contact Sydney Technology Solutions at [email protected] or call us at (02) 8212 4722. We’re here to help you find the right solutions for your valuable information!