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Article by Drew Cordell
The two previous articles (part one and part two) in this series covered the basic mechanics of the blockchain and the largest problem the blockchain currently faces. Now, I will move on to the future of the blockchain. In the last part, I talked about a method of storing and time stamping any document on the blockchain through a fairly simple method. This method allows users to back legal claims using blockchain technology, all for about four cents worth of a transaction fee. While the blockchain can be used to store documents, that is not all that it can do. In this part, I will be talking about how the blockchain can simplify modern banking, and how bitcoins can represent real world assets. While these innovations don’t currently live up to their potential, they will likely be crucial for Bitcoin’s future.
The Colored Coin protocol will likely play in important role in Bitcoin’s future and the future of blockchain technology. Colored Coins, according to Coinprism:
“are a way to issue and transfer any assets on the Bitcoin blockchain. Colored coins can be used to represent anything, such as stocks, bonds, smart properties, securities, precious metals, commodities, other currencies (such as dollars, pounds or euros), and even other cryptocurrencies. A company which wants to do an IPO can do so with Colored Coins in a matter of minutes and practically for free: they can use Coinprism to create and issue shares. The shares can then be exchanged as easily as Bitcoins through the Blockchain, across the world, instantaneously and with minimal fees. Colored Coins also enable people to create smart properties. A deed for a house can be represented on the Blockchain as a colored coin. The owner of that coin is then the legal owner of the house. Transferring ownership of the house becomes as simple as making a Bitcoin transaction.”
Coinprism is a great tool to use when issuing tokens. Companies can create an IPO in only a few minutes using the platform. In order to utilize Colored Coins, a user currently has one of three options in terms of color-aware wallets: Coinprism.com, the Coinprism app on the Google Play store, and cloud.gethashing.com. The Protocol needs to be further simplified, and users need more wallet options before widespread utilization of Colored Coins can take place. While users need color-aware wallets to create assets, any Bitcoin wallet can receive colored funds, and if they accidentally send funds from that address, the asset will be destroyed. While Colored Coins have a long way to go, they do provide a way to hold proof of ownership of any asset on the blockchain, something which will be essential moving forward.
Going forward, blockchain technology will likely become integrated in modern banking institutions. In addition to simplifying the process of banking, the blockchain could also make transactions significantly cheaper for banks. Most banks in the world (except for some countries) still use the Automated Clearing House (ACH) method of clearing transactions. ACH was created over forty years ago; it bunches transactions together in predetermined intervals of time and clears them as a bundle. ACH is the reason it takes 3-5 days for a check to deposit in your bank account. Simply put, by using the blockchain for banking, checks would deposit in about an hour (after reaching a mature number of confirmations). The blockchain has the power to simplify and speed up banking, and it likely will. Many banks have already expressed interest in the technology, but have been slow to move. Most banks don’t like change, for it creates competition. Things in banking remain relatively unchanged as time goes by, many of the systems and ideas currently used have been around since the 1700’s. When the blockchain hits banking, it will be big.
In the next and final section of All About: The Blockchain, I will be covering sidechains and what they could mean going forward.