Tech Talk: What is Blockchain and How Will it be Used?
If you’ve been paying attention to any of the news outlets recently, you’ve most likely heard about Bitcoin and how much money some people have made from their early investments. Many people have read these reports, researched how to buy Bitcoin and purchased some for themselves. Usually, the research isn’t extensive or thorough, people hear they can make 1000% profit on an investment and jump in head-first without exploring the risks associated with their investment.
Last week we wrote about advancements in technology and how they may impact the insurance industry, focusing on how artificial intelligence may be able to change the way companies do customer service. Another technology that may contribute to the insurance industry is Blockchain. Blockchain was an idea that was developed by Bitcoin’s creator, an anonymous developer using the pseudonym Satoshi Nakamoto.
The Blockchain is the backbone of Bitcoin, and many other cryptocurrencies, that allows them to be decentralized, one of the main attractions to these alternate forms of currency. A simple definition of Blockchain is that it’s a network of computers that facilitates secure online transactions. The extensive definition is much longer, too long to include in this post, so we’ll stick with the simple explanation for now.
How does it work? Blockchain technology utilizes computers that voluntarily connect to the network for a number of reasons, related to bitcoin it’s a network of computers that is constantly verifying transactions and updating the ledger of who’s sending who Bitcoin and how much each “wallet” holds by solving extensive algorithms. The computers that are doing all this work are called “miners” and receive compensation for their work, typically they receive portions of the fees associated with sending and receiving Bitcoin and are rewarded with larger amounts when they solve computational puzzles.
Enough tech-talk. Now we want to examine how Blockchain could benefit the insurance industry and its consumers, people like you. In the last several years, as use of the internet has grown exponentially, we’ve heard of numerous hacks and data breaches which have left millions of customers personal information exposed to criminals. There hasn’t really been a way around this because that information is required to do so many things, applying for a loan, a bank account, cell phone coverage, utilities, online shopping and so much more.
Blockchain has mitigated, lowered, the risks we face. Because the information stored is decentralized, not held in one single location like our information is currently stored, it is much harder for hackers and criminals to gain access to it. Another layer of security is the use of complicated algorithms used to verify transactions by computers on the network, with a certain amount of verifications needed for any transaction to be successful it would be much harder for criminals to successfully gain access to the information.
Here’s an example. Most banks have one ledger of all the account holders, how much each account has, who owns the account and their personal information. This is an easy target for hackers because they only have one or two walls to break through to gain access to the information. In the Blockchain network the ledgers and information are held in thousands of places at the same time, any transaction must be verified as legitimate numerous times to be successful and the verifications only come from approved computers.
What this means is that hackers would essentially have to successfully hack thousands of computers at the same time and hope that any of the remaining computers weren’t able to verify the transactions quickly enough to flag it as a fraudulent transaction. This complicates the process for hackers significantly, making it much harder for them to gain access to the personal information we are required to share so frequently.
If you haven’t already realized how revolutionary this is, that’s okay. It is a very difficult technology to understand with many moving pieces and factors that the vast majority of people have a hard time grasping. The important thing to keep in mind is this, Blockchain is revolutionary in many ways. There are limitless possibilities for the technology, not just creating new currencies, that can serve to protect us, simplify our lives and open the doors for entrepreneurs, and existing companies alike, to bringing us things like cheaper healthcare, property insurance and so much more.
For more information on Blockchain technology we’ve found that this article provides very useful information that isn’t too difficult to understand. If you’re a business owner, technology buff or work for a company that could possibly benefit from Blockchain, we strongly encourage you to do some research!
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