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New kids on the block

It is like the Gold Rush when it comes to investors looking at M&A opportunities in blockchain. But what is it and how does it work?

The past year has seen the word blockchain leap out of technology seminars and into boardrooms. And what are they saying about it? According to Fred Wilson, the legendary venture capitalist of Union Square Ventures and a man who first invested in blockchain companies in 2013, they’re saying: “I need some blockchain. Where do I get some blockchain?”

Wilson was referring to the eagerness of banks and finance companies to rush into deals with blockchain start-ups, putting part of the motivation down to the fear of being left behind. “When the dumb money turns up, it’s time to get out,” he said, adding another expletive somewhere in the middle of that sentence. But what is Wilson railing against? We need to rewind…

What is it?

Blockchain, in the simplest terms, is a data recording tool. It provides a digital ledger of transactions, agreements, contracts, or anything else that needs to be recorded and verified. It is a distributed database, which produces an ever-growing list of data records. These records are secure, because they cannot be tampered with or revised.

The key to blockchain technology and security is that the ledger isn’t stored in one place. Instead, it is copied into all the computers in a participating network. Data is stored in fixed structures called ‘blocks’, each of which has a timestamp, and are combined to form a ‘chain’. The multiplication of participants provides security for the transactions. With its speed and low operating cost, it’s suitable for use in currency, as well as in governmental or financial services. As the technology grows and applications specialise, there will be many applications for blockchain technology across many sectors.

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