An introduction to Block Chain
The blockchain is the main technology behind the cryptocurrencies like Bitcoin & Ethereal, but if looked carefully it is much more than an instrument of finance. A blockchain is basically a new form of a database, which solves the age-old problem of double spending, without the need of a trusted 3rd party institution. It is a kind of database, where the data is saved in a constantly generating block, which is linked to form a chain, thus the name Blockchain. In other words, it is an encrypted database, which is distributed to form digital ledger of any transactions. Blockchain can be accessed from countless computers worldwide and is not confined to one machine, thus giving it the much-needed flexibility.
This digital innovation has revolutionized the financial markets in terms of method of secured transactions between two trusted parties. The entire show is performed in a controlled cryptographic environment, which has a positive impact on the cybersecurity of the entire system. Soon we will see that Blockchain technology will jump out of the financial sector and be applicable in the fields of real estate, entertainment, etc. There has always been a problem of hacking with established financial institutions, which blockchain alters with its democratic process of error proofing.
Why was the need for a technology like a blockchain felt?
Blockchain was basically meant to secure transactions in an open and transparent manner. It overcomes the following problems with traditional database based approach.
- Minimum or no trust in the stakeholders involved in the transactions.
- The requirement of digital signatures.
- Has P2P (peer to peer) computing network, which shares task between peers.
- Presence of Proof of work- since blockchain is completely decentralized; every current and future node can be checked for the validity of the transaction, which follows some clear set of rules, making it sure that a person can’t promise money to two people at the same time. Only after the first block is honored, the 2nd block can be raised.
- Presence of a public history of transactions.
- All the rules and incentives are placed through a robust mechanism of Conesus.
With the introduction of the blockchain, participants can meet over the internet and undertake transactions without the need of a 3rd party institution like a bank. Now, it is ensured that no personal information about the participants is shared, which creates an encrypted transaction record, which is more secure than a bank. One of the most exciting features of blockchain is that it reduces even the smallest chance of data breach or manipulation. Unlike traditional database systems, blockchain has multiple copies of the same database, which makes it impossible for any cyber attack. With blockchain, it is impossible to reverse the transaction, which makes it a potent international tool to conduct business. Another important feature of blockchain is its decentralized nature, which facilitates all the current and future nodes to check whether every transaction is following the given set of rules. This makes it absolutely sure that any individual cannot promise money to tow people at the same time, removing the need for any 3rd party check.
The structure of a blockchain
The blockchain is basically an endless chain of the block, where the order of the chain defines the past transaction. The chain expands bottoms up, with the first block being special, as the same has no preceding blocks. Colour coding is given for blocks which form the part of authentic transactions and separate colors for “forks”, which are blocks raised previously at the same time. In today’s world, trust is a common problem faced by almost every individual seller or buyer. To counter this problem, blockchain is created to facilitate secure payments between authentic buyers and sellers, who have never met or will meet in the future. With blockchain no party has the power to reverse the transaction, thus maintaining the sanctity of conducting business. However, blockchain should be used with proper training, which will prevent the creation of faster blocks, which means chances of “forks”, or false block, arises.
Blockchain technology finds its use, in various fields like hospitality, healthcare, government, and financial services. For example blockchain in health care has the power to increase the privacy of the data. It also helps in the sharing of healthcare data amongst different stakeholders. It avoids unnecessary overhead costs by eliminating the need for any 3rd party intervention. In other words, wherever there is a scope or need for data exchange, blockchain can be of paramount use.