link3822 link3823 link3824 link3825 link3826 link3827 link3828 link3829 link3830 link3831 link3832 link3833 link3834 link3835 link3836 link3837 link3838 link3839 link3840 link3841 link3842 link3843 link3844 link3845 link3846 link3847 link3848 link3849 link3850 link3851 link3852 link3853 link3854 link3855 link3856 link3857 link3858 link3859 link3860 link3861 link3862 link3863 link3864 link3865 link3866 link3867 link3868 link3869 link3870 link3871 link3872 link3873 link3874 link3875 link3876 link3877 link3878 link3879 link3880 link3881 link3882 link3883 link3884 link3885 link3886 link3887 link3888 link3889 link3890 link3891 link3892 link3893 link3894 link3895 link3896 link3897 link3898 link3899 link3900 link3901 link3902 link3903 link3904 link3905 link3906 link3907 link3908 link3909 link3910 link3911 link3912 link3913 link3914 link3915 link3916 link3917 link3918 link3919 link3920 link3921 link3922 link3923 link3924 link3925 link3926 link3927 link3928 link3929 link3930 link3931 link3932 link3933 link3934 link3935 link3936 link3937 link3938 link3939 link3940 link3941 link3942 link3943 link3944 link3945 link3946 link3947 link3948 link3949 link3950 link3951 link3952 link3953 link3954 link3955 link3956 link3957 link3958 link3959 link3960 link3961 link3962 link3963 link3964 link3965 link3966 link3967 link3968

Blockchain: A Primer and Promises for the Future of Payment Tech

Blockchain:
A Primer and Promises for the Future
of Payment Tech

 

Bitcoin — you might have heard about this digital currency, and it’s gaining some traction in payments. Online retailers like Newegg and Overstock.com accept it. There are services that let consumers convert Bitcoin into gift cards for use at their favorite retailers. And beyond that, bitcoin doesn’t seem to be going away.

Bitcoin, however, is but one piece of the conversation about emerging technologies such as blockchain and distributed ledger technology, thus it helps to first start a conversation about these concepts. You might even be more curious to learn how blockchain and Bitcoin might feature in the future for your business.

What is blockchain?

The easiest way to understand blockchain is to think of it in terms of a typical bank account. When you spend money, it’s recorded as a transaction in your bank account, right? It’s the same thing with bitcoin or other industries using blockchain technology. A transaction is recorded in a “block.” Think of blocks like your monthly statements, which neatly divide up your transactions for easy reference (month, date, time, vendor, amount, credit or debit). A set of transactions is recorded as a block once it?s been verified by distributed trusted parties.

Once a block of transactions is complete, they become part of the blockchain. They are linked together in proper order (both chronologically and in a linear fashion), and each block links to the block before and after it in the sequence — much like your bank statements for each month showing a starting and ending balance. Blocks are impossible to alter once they’re part of the blockchain, which can create a more trusted, unchanged record of transactions or data that a large network of parties can see and verify.

How does blockchain work within the use case of currency?

To understand how virtual currencies such as bitcoin and other blockchain-based systems work, we have to have a look at credit/debit transactions and cash. Credit/debit transactions are what are referred to as “pull payments.” A merchant terminal (virtual, i.e. online, or physical) processes a customer’s credit card using all of the encoded information and then decides how much money to “pull” from a customer’s account to satisfy a purchase.

Cash, and bitcoin are “push” forms of payment. In every bitcoin and cash transaction, a customer decides how much money to hand over to a merchant to satisfy a purchase. There’s no exchange of sensitive personal information, such as what’s found on a plastic card. Bitcoin and cash are not reversible and each can only be refunded by the holder who is initiating a return. This means that bitcoin and other forms of payments powered by blockchain technology are more like cash than even a debit transaction. It also means that industries outside of payment technology are taking notice of how the foundation, blockchain, could help better manage data and information.

How is blockchain being used outside of payment processing?

The mortgage title industry and diamond industry have begun leveraging blockchain technology to solve some of their most critical challenges. According to a January 2016 report by NASDAQ, these two industries are taking advantage of blockchain technology in a few ways.

The diamond industry has long faced challenges around fraud relating to the certification of diamonds, which can dictate the value of one diamond over another. Blockchain technology allows for the recording of diamond certification and for that information to be immutable and shared between insurers, law enforcement, and those who are filing claims. For the real estate sector, title fraud is also a rampant problem. By recording property titles using blockchain technology, title insurance companies can save millions each year fighting title fraud, because titles become permanent and in historical record once they are part of the blockchain. There are other pending applications for medical technology (such as sensitive patient medical information) and the credit ratings industry as well.

What’s next?

Blockchain technology has been gaining attention for some time, and several industry consortiums have developed to track and innovate with the technology and identify applications for it in business. Just a segment of these groups includes R3 and Chain, two consortium groups, and consulting specialist groups such as SolidX. Ultimately, it will take many factors to determine the applications and use cases of blockchain technology in the coming years, but it has become a promising mechanism for data management, record-keeping, and payment processing in its early stages.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member