The blockchain economy is a scenario and potential future environment in which the technology replaces current monetary systems, potentially on a global basis.
Blockchain is a distributed ledger, essentially a type of decentralized database that stores a secure and permanent record of transaction data. Mechanisms in the technology ensure that the records of assets and transactions cannot be tampered with. Distributed ledgers have no central data store and are managed through a peer-to-peer (P2P) architecture. Blockchain is most commonly associated with the Bitcoin cryptocurrency but it has many other potential applications, including distributed software and storage systems. Blockchain can also be used to securely store and exchange data about individuals, including their identities, assets, financial and professional histories, medical records, tax-related data and consumer preferences, among many other possibilities.
For financial institutions, blockchain and similar digital ledgers can reduce the costs associated with transactions. Because the system is decentralized and distributed, it doesn’t require the intermediaries that add overhead and processing requirements. Mathematical functions in the system add a layer of protection to each transaction, drastically reducing the possibility that anyone could tamper with a record. The security of transactions within the system makes it much less vulnerable to fraud and cybercrime than conventional banking systems.
Blockchain could revolutionize the burgeoning sharing economy by facilitating the secure exchange of value among participants in a given system. The peer-to-peer (P2P) system of exchange is inherently democratic, based on shared ownership and equality among participants rather than owners seeking to profit from users of the system. Such a P2P system is sometimes referred to as a platform cooperative.
See also: collaborative consumption
Bettina Warburg explains how blockchain will radically transform the economy: