What is Blockchain?
In simple terms, a Blockchain can be described as an append-only transaction ledger. What that means is that the ledger can be written onto with new information, but the previous information, stored in blocks, cannot be edited, adjusted or changed. This is accomplished by using cryptography to link the contents of the newly added block with each block before it, such that any change to the contents of a previous block in the chain would invalidate the data in all blocks after it.
Blockchain is a direct business-to-business or peer-to-peer transaction without the involvement of any
- Intermediaries of any kind.
Banks and Governments act as intermediaries creating trust and certainty by facilitating the transaction of goods and services.
Problems with the current system
Banks and governments often add delays and impede the free flow of business due to the time it consumes to process transactions and regulatory requirements.
Some of the critical issues :
- Centralized power – Currently, all the systems are managed by a central governing authority.
- Private ledgers – Every system has their own private ledgers.
- Prone to corruption/hacking – At the time of reconciliation, the system is prone to corruption or can get hacked by an external source.
Why use Blockchain?
Blockchain technology creates decentralised digital public record of transactions which are
Blockchain is Like Google Docs
Here’s a clever metaphor for blockchain from William Mougayar, the author of The Business Blockchain: blockchain is like Google Docs.
Before Google Docs, if you wanted to collaborate on a piece of writing with someone online you had to create a Microsoft Word document, send it to them, and then ask them to edit it. Then you had to wait until they made those changes, saved the document, and sent it back to you.
Google Docs fixed that by making it possible for multiple people to view and edit a document at the same time. However, most databases today still work like Microsoft Word: only one person can make changes at a time, locking everyone else out until their done. Blockchain fixes that by instantly updating any changes for everyone to see.
For banking, that means that any money transfers are simultaneously verified on both ends. Blockchain could also be used in the legal business or architecture planning— really any business where people need to collaborate on documents.
How Blockchain works?
- Block is a part of blockchain which records all the transactions.
- Once the sequence of the transaction is over, it goes into the blockchain database permanently.
- Each time a block gets completed, a new block is generated.
Blockchain combines 3 existing technologies
- P2P Networks
- Game theory
to make sure that a disparate network of actors who do not know or trust each other reach consensus over which transaction is correct, without a centralized party.
Some of the important applications include :
- Smart contracts : Distributed ledgers enable the coding of simple contracts that will execute when specified conditions are met.
- Governance : By making the results fully transparent and publicly accessible, distributed database technology could bring full transparency to the election process or any other kind of poll.
- The sharing economy : By enabling peer to peer payments, the blockchain opens the door to direct interaction between parties – a truly decentralized sharing economy results.
- Identity management : Distributed ledgers offer enhanced methods for proving who you are, along with the possibility to digitize personal documents. Having a secure identity will also be important for secure transactions- for instance in a sharing economy.
To learn about types of blockchains, click the below link: