Blockchain is the underlying technology behind cryptocurrency. It is a decentralized, encrypted network for making secure transactions between entities. All transactions are registered on what is known as a “ledger” which is essentially a public registry across the network that keeps an immutable record of all transactions that have taken place. The technology however, also has a lot more broader implications for society and it is being used as a means for creating legally binding, immutable contracts (“smart contracts”) and even for creating virtual reality worlds. Already, the top US law firms including Cooley LLP, Debevoise & Plimpton LLP, Hogan Levells, Holand & Knight LLP, and Jones Day among others have partnered with blockchain based companies (in this case the Ethereum Enterprise Alliance) to develop smart legal contracts.
Smart assets refer to the various other applications for storing information regarding assets on the blockchain. For instance, the blockchain can be used to keep immutable records of land deeds on a secure public ledger and many companies are working on ways to enable this same concept for other things such as medical records to give another example. A smart contract is very similar to the traditional legal contracts we are familiar with in society, except they are incorporated into the blockchain. Currently, companies are developing ways for the general public to draft their own, legally-binding smart contracts without requiring a third-party mediator like an attorney whose services can be very expensive. By incorporating these smart contracts into the blockchain, these contracts are now immutable and can even be programmed to self-execute functions. What does this mean? Say for example, you chose to set up a contract for a lease and wanted the contract to include terms for payment, you could set the amount and dates for payment and have the blockchain network automatically handle the transactions withdrawing the amount from the lessees account into yours. The smart contracts can also have terms (as would any other regular contract) for what penalties and consequences there would be if say upon attempting to withdraw from the lessee, the lessee had insufficient funds in their account.
The goal of all currencies is to provide a standard means for exchanging value between human beings. Currencies don’t actually have any intrinsic value per se beyond whatever we ascribe to them and practically anything can be used as a means of exchange as long as people ascribe value to them. Currently, most people use what is known as “fiat currency,” that is, a nationalized currency whose supply is controlled by private central banks. Fiat currencies have proven to be very volatile as they are not actually backed by anything and their supply is artificially manipulated by these central banks to leverage the economy in a certain direction. Cryptocurrency, the first of which was bitcoin, was developed in 2009 after a paper was published by a person under the pseudonym Satoshi Nakamoto in a computer science journal online. This paper essentially detailed new complex mathematical algorithms and laid out the schematics for developing a completely new, decentralized financial system based on cryptography.
Bitcoin eventually took off in popularity and began being used as a means of exchange by many individuals. Companies around the world eventually also embraced it as well as other blockchain based cryptocurrencies like ethereum, litecoin, zcash, etc… that were created after. According the The Organisation for Economic Co-operation and Development, approximately 10% of the world’s GDP will be on blockchain by 2027 and currently some of the largest financial institutions and corporations are involved in cryptocurrency including Goldman Sachs, Bank of America, Microsoft, Mastercard, Dell, and Paypal among a plethora more. Beyond this, more and more businesses across the world are adopting and accepting cryptocurrencies as form of payment.