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An insight into Blockchain technology

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Jibu James,Senior Software Engineer

The distributed ledger technology, better known as blockchain, has the potential to eliminate huge amounts of record-keeping, save money and disrupt IT in ways not seen since the internet arrived.

The hype around this seemingly new, secure electronic ledger is real.

What is Blockchain?

Blockchain is a distributed database, or ‘ledgers’, existing on multiple computers simultaneously. It is constantly growing as new sets of recordings, or ‘blocks’, are added to it. Each block includes the cryptographic hash of the prior block (a timestamp and a link) in the blockchain, linking the two. The linked blocks form a chain. The database is not managed by any particular body; instead, everyone in the network gets a copy of the whole database. Old blocks are preserved forever and new blocks are added to the ledger irreversibly, making it impossible to manipulate by faking documents, transactions and other information.

 

When we take into consideration the hugely popular cryptocurrencies like BitCoin, each change to the ledger is cryptographically signed to prove that the person transferring virtual coins is the actual owner of those coins. 

 

If you’re still wondering what it is, think of the blockchain as a digital medical record: every record is a block which has a label stating the date and time when the record was entered. The medical history is extremely important for diagnosis and treatment purposes, so neither the doctor nor the patient should be able to modify the records already made. Nevertheless, the doctor owns a private key that allows him to make new records, and the patient owns a public key that allows him to access the records anytime. This method makes the data both accessible and secure.

 

Origin

Blockchain technology was originally developed as part of the digital currency Bitcoin. But the two are not the same. Blockchain can support a wide range of applications, and it's already being used for peer-to-peer payment services, supply chain tracking and more.

 

The first blockchain was conceptualized by Satoshi Nakamoto in 2008. It was implemented the following year by Nakamoto as a core component of bitcoin, where it serves as the public ledger for all transactions on the network. Through the use of a blockchain, bitcoin became the first digital currency to solve the double spending problem without requiring a trusted authority and has been the inspiration for many additional applications.

 

The original Bitcoin software was released to the public in January 2009. It was open source software, which meant anyone could examine the code and reuse it. And many have.

 

Why all the hype?

  1. Secure

Blockchain is designed to store information in a way that makes it virtually impossible to add, remove or change data without being detected by other users.

  1. Decentralized

Today, transactions are verified by a central authority—like a government or a credit card clearinghouse. Blockchain applications could replace these centralized systems with decentralized ones, where verification comes from the consensus of multiple users.

  1. Blocks and hard forks

Blocks hold batches of valid transactions that are hashed and encoded. A ‘block time’ is the average time it takes for the network to generate one extra block in the blockchain. A hard fork is a change of the blockchain protocol that is not backward-compatible; i.e., older client versions would not accept blocks created by the updated client, considering them invalid.

 

Use Cases

Blockchains establish trust, and they have the potential to transform everyday transactions. They provide a simple, paperless way to establish ownership of money, information and objects.

  1. General potentials

Blockchain promises to bring significant efficiencies to global supply chains, financial transactions, asset ledgers and decentralized social networking.
Blockchain protocols facilitate businesses to use new methods of processing digital transactions. Examples include a payment system and digital currencies, facilitating crowdsales and prediction markets.
They can be used to develop information systems for medical records.

  1. Land registration

The government of the Indian state of Andhra Pradesh has been trying to fight land fraud using blockchain. https://cointelegraph.com/news/indian-state-uses-blockchain-technology-to-stop-land-ownership-fraud 

  1. Accounting

The major players in the accounting industry, are testing their private blockchains. Ernst & Young has provided cryptocurrency wallets to its Swiss employees and accepts bitcoin as payment for all its consulting services. 

  1. Nonprofit organizations

Several of them are trying to use blockchain for faster, cheaper, and more secure transactions.

  1. Governments and national currencies
  2. Banks

Banks such as UBS are opening new research labs dedicated to blockchain technology in order to explore how blockchain can be used in financial services to increase efficiency and reduce costs.
MasterCard has added three blockchain-based APIs for programmers to use in developing both person-to-person and business-to-business payment systems. 

And the list goes on.

 

Advantages

  1. Immutability

Nothing on the blockchain can be changed without the consensus of the network.

  1. Permanence

As long as the blockchain remains operative, the data on it will be accessible.

  1. Removal of intermediaries

Peer-to-peer nature of blockchain does away with the need of intermediaries and users interact directly with each other.

  1. Automation

With the removal of intermediaries and the ledger being updated real-time, any data inputted on the blockchain is transmitted and stored automatically.

  1. Decentralisation of consensus

With no central authority for transaction validation, the effort needed to reach consensus is shared between the miners.

  1. Speed

Much faster process than a centrally-controlled ledger.

  1. Lower costs

Along with much lower costs due to the removal of intermediaries.

  1. Near-impossible loss of data

Since every miner has a full copy of the ledger on their system, it is virtually impossible to lose the data stored on a blockchain

 

Challenges and Future

The transparency of blockchain has real benefits for regulators. But it's still a new technology, with no standardized implementation. Lawmakers will need time to resolve questions about liability and other legal issues.

 

Blockchain is protected by business-grade cryptography, but no technology is 100% secure. And when large sums of money are involved, hackers will try to follow. So security concerns could also slow blockchain adoption.

 

Blockchain tech is still developing and it’s legal and regulatory status is uncertain. Other worries concern integration and universal adoption, as to be truly effective the platform would need to be implemented across all industries. But the possibilities are so promising. It could be a revolution in the way everyone—businesses, governments, organizations and individuals—work together. It provides a simple, secure way to establish trust for virtually any kind of transaction, helping simplify the movement of money, products or sensitive information worldwide.