Blockchain technology provides a means of creating and maintaining an immutable and transparent database and ledger that may be distributed and shared by authorized users. A blockchain establishes one correct, true version of the entire pool of information related to an enterprise, crucial for compliance with record-keeping requirements and essential to the management of operations.
Blockchain technology allows businesses to securely extend their processes and applications while accelerating all systemic transactions. Blockchain includes distributed ledger technology and smart contracts. Industry experts typically refer to these three technologies collectively as “blockchain.” In the past, blockchain was more well known as the technology underpinning bitcoin, the first decentralized digital currency payment system, which works without a single bank or administrator.
A blockchain is a database that cannot be hacked. Blockchain enables transaction records to be kept on a digital ledger and shared through a network. The primary benefit of a blockchain is its capacity for building and maintaining a secure and inflexible, and therefore unalterable or unmodifiable, ledger of information in conjunction with other open source technologies. A blockchain is inherently immutable – once a record is written to a blockchain, it exists there forever and cannot be altered, available to be seen by any person with access to the chain.
A blockchain uses cryptography as security. A cryptographic key is both a public key visible to anyone joined mathematically and a private key seen only by the holder or user. The database cannot be hacked by someone posing as an authorized user since a private key never exists beyond the authorized user’s computer.
Many businesses are adapting to this new technology for managing financial, medical and legal records. Thus, blockchain technology may eventually replace banks, credit agencies, and other traditional intermediaries. Gartner Inc. projects that blockchain’s business value-add will grow to $176 billion by 2025. Credit Suisse Group AG, U.S. Bancorp, Wells Fargo & Co., and Western Asset Management Co. have recently stated that they successfully tested the distributed ledger technology as a means to standardize the data used in securitized home loans, as well as make it more transparent.
As California is typically at the forefront of the innovation of web technology, it is not surprising that the California legislature unanimously passed AB 2658., which establishes a blockchain working group to study the uses of, risks and benefits associated with, and the legal implications of the use of blockchain by state government and California-based businesses. The working group consists of industry leaders, technical experts, representatives from privacy and consumer protection organizations, as well as state information officers. Additionally, the measure defines “blockchain technology” for the first time in a California statute.
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