Blockchain is a distributed ledger, in which databases are shared, reproduced, & are synchronized among the particiapnts of network which is decentralized. It is useful to maintain a permanent & hack-proof or tamper proof transaction of data.
That’s a lot of technical stuff on one strike. Let’s start it from the very basic of “transactional data”, after all it is a big ‘deal’.
The transaction in the world we are aware of is possible because of the presence of intermediates. Intermediates for example banks or the government facilitates the transaction of goods and services by creating trust and certainty.
EXAMPLE 1. Electronic payment:-
While using a credit or debit card for transaction to the third party intermediaries, the bank approves, track and record the transaction for each party in their private accounts.
EXAMPLE 2. Real estate:-
When an individual buys a new property, government keeps the record of the change in property ownership and manages the real estate distribution.
So what’s the problem there?
The time for regulating and recording the data that governments and the banks consume , often delays and impede the flow of business and being the centralized authority to manage these records, there is possibility of the data being hacked or corrupted.
Applications of Blockchain Technology
Let’s imagine the world without intermediates, where in the place of government or banks, we have a technology that provides the same experience, direct business to business or peer to peer, without giving room for delay neither compromising the security aspect. So welcome to the world of ‘BLOCKCHAIN’. Block is basically a store where the details of each transaction are included, say the date, name , the amount of money that has been transferred. Each block stores information that distinguishes from the other block through a unique code with unique history of transaction. Then the block is verified by thousands of computer around the net. Once the sequence of the transaction is over, it goes into the blockchain database permanently. The data being managed by cluster of computers and decentralized, it is practically impossible to falsify a single record. Blockchain is a simple and automated way of passing information securely.
Blockchain technology does not contain any transaction cost challenging all those business models that rely on the tinch of money for the process of transaction. For example, we buy tickets for travelling through railways, we buy it online. The credit card company cuts the brokerage fee for processing the transaction. In Blockchain technology, the broker is being eliminated here, and there is a direct link of the railway company to the passenger for the transaction purpose and we save the processing fee. That’s how the third party has been excluded. The ticket works as a block which has unique identity and is added to the ticket Blockchain. Hence, just like the ticket Blockchain contains all the records of the transaction, that is, a particular journey, or the records of entire train networks, every route ever taken. And falsification of any on ticked would question the entire network, well that’s a chimera. Another example would be cutting out the charges that we pay for buying a book online, and rather than paying to the mediator, the money directly goes to the writer. The books would propagate in encoded form & a blockchain transaction would send the money to the author & unlock the book. Then the market place would be inessential for online purchasing books.
So in a way, Blockchain could change the method of maintaining records, and almost every void financial institution will be replaced by Blockchain technology.
As explained earlier, Blockchain system comprises of two types of records- transaction and blocks. These transactions are the process carried out in a particular period and stored in a block. Every block is given an unequaled cryptographic hash that links to the previous transactions linking them to a compact string.
Cryptography in Blockchain
Now Cryptographic hash Or Cryptography is a significant aspect of the system that needs to be explored. It’s a technique to convert the actual text into encrypted text that makes it difficult to manipulate the information. It’s the use of mathematical formula to create a secure distributed ledger which unables the third party to intervene. It secures the data and maintains the transparency of the transactions with providing privacy to the individual users.Cryptography warrants guarding data through complex computation logic rather than keeping it just safe.
As we are aware, in Blockchain every transaction is propagated between nodes of networks, in a peer-to-peer form so that, no one knows the origin of the transaction.
Blockchain uses advanced level encryption so that it can be completely secured.
So it is clear till now that:-
•Blockchain is not owned by a single entity, hence it is decentralized.
• The data is cryptographically stored inside.
• Blockchain
is immutable, and can’t be tampered to access the data inside the blockchain.
•The blockchain is also transparent to track the data whenever we want to.
Why blockchain is considered among top technologies?
“Blockchain is expanding its application scope beyond banking and financial institutions into a wide range of use cases across industries; the global funding to blockchain startups since 2014 is noted to be in excess of $1 billion.”
–Frost and Sullivan TechVision Program manager, KiranKumar.
The elegance of blockchain is that it obviates the need of authority to verify trust and transfer of value. Decentralisation, transparency and immutability are the three pillars of that sets the technology apart from any other system.
Decentralisation
Before the emergence of Bitcoin, the world operated through a centralised authority to which one has to look up to solely for extracting any information. But these autonomous authorities have several vulnerabilities.
- When the data is stored at one spot, it is easier for the hacker to have illegal access to it and high probability of the data getting corrupted.
- If the central system has to be upgraded, it disrupts the whole process of business.
- The trust on the single entity holding the entire data is highly risky of the entity being jeopardized.
What the benefit of network being decentralised is that everyone in the network owns the information.
Immutability
It is the ability for a blockchain ledger to remain unalterable and indelible history of transactions. It means once data has been written to a blockchain no one, not even a system administrator, can change it.Its beneficial for databases of financial transactions. The cryptographic hash function is the reason of its idiomatic characteristic of this technology.
- The system inputs actual data and outputs encrypted string of numbers and names that serve as a digital signature.
- A minute change in the file results in a drastic change in the output.It is called the “Avalanche Effect.”
- The process is irreversible, I.e., it’s not possible to work backward from an output string to determine the input data.
But the question arises, if the data is encrypted, how blockchain can be regarded as truly transparent?
Transparency
The transparency, that has never existed before, of a blockchain stems from the fact that the holdings and transactions of each public address are open to viewing. Although the person’s real identity is hidden through cryptographic capabilities, one can still see all the transactions that is done by their public address.It is in this way that blockchain gives large businesses a platform to act with genuine integrity towards their community and customers.
With this much of transparency and decentralised management, the individuals on the network would be empowered. One could run systems that aren’t possible in the current setup. Blockchain will do to Technology what the Internet did to Communication.
