Bitcoin first hit the market in 2009 as open-source software, introducing consumers everywhere to the concept of a digital currency that transcends borders and government entities, and is regulated only by its own complex system of technological checks and balances.
While Bitcoin itself has since struggled to gain acceptance from consumers and financial institutions alike, the technology underpinning Bitcoin transactions may just be the next big thing in the world of transaction processing and recording.
“As a virtual currency, Bitcoin has no regulating agency or bank behind it,” said Lois Hansen, vice president, product development, for CO-OP Financial Services. “However, underlying the Bitcoin application is a highly sophisticated protocol called blockchain, and this technology has the financial world taking note.”
How Blockchain Works
Hansen describes blockchain as a public, distributed ledger of all bitcoin transactions ever executed. “It includes two types of records, transactions and blocks,” she said. “Transactions include the actual data stored in the blockchain, and blocks confirm exactly when and in what sequence transactions have occurred.”
And, as new blocks are added, Hansen notes that the blockchain continues to grow in a linear, chronological fashion, yielding a complete, historically accurate database of all transactions within its ecosystem.
According to Brian Bodell, CEO of Finivation Software (a CO-OP business partner), what is truly unique about blockchain technology is its ability to distribute both processing power and the verification of transactions across a broad, decentralized audience. Plus, its advanced cryptography increases the security of transactions.continue reading »