Why credit unions should care about Blockchain

In part 1 of our 2-part article on bitcoin and blockchain, we attempted to shed some light on what bitcoin is and why users around the globe are showing interest in adopting the cryptocurrency and its underlying blockchain network.  It is important for credit unions to know more about blockchain as a global cyber technology so that you are fully prepared to capitalize on its benefits when presented.  As we discussed, blockchain technology is a critical part of the bitcoin network but blockchain does not necessarily need bitcoin to provide utility as a standalone network. How bitcoin fares as a crypto currency in the global economy is anyone’s guess, but it would be tough to argue that adoption of blockchain is going away anytime soon. The excitement around the use of blockchain as a way of sharing and transmitting data seems to be growing.  This is easily seen by the staggering increase in investment in the technology as industries around the world try to find ways to take advantages of the benefits of the blockchain. In fact, many believe this technology will transform banking and cyber security as we know it.

What is blockchain?

Blockchain in its simplest form is a network like any other network.  Like email and the internet, the blockchain can transmit and receive data.  Where blockchain differs from other network types is with its distributed ledger concept.  The distributed ledgers that resides within the blockchain network are very similar to an accounting ledger that record every transaction that takes place on the network.  A copy of this distributed ledger is kept by every node of the network.  Transactions are grouped into blocks which are then chained together to form a blockchain, also known as the distributed ledger.  Using email as an example, this would be akin to everyone that participates in the email network having a copy of every email that was ever sent and in chronological order. Now that may sound a bit scary, but within the blockchain network there are ways to encrypt and validate data so that only the parties that need to see the contents of a transaction have the ability to do so and everyone can agree to the validity of the data within blockchain.  The distributed ledger provides the ability to ensure that everyone is in agreement with the chronology and the content of all transactions that have occurred on the network without the need for a central party to validate any claims.

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