What is a Blockchain?
B lockchain is a distributed digital ledger, which is used
to keep up a persistently developing a list of completed blocks. Blocks are connected through links and contains time-stamp
and information. Each transaction can be recorded between two parties effectively and permanent way.
Blockchain technology is a build in robustness nature, because it cannot be controlled by any single entity and no
single point of failure.
Blockchain was first implemented by Satoshi Nakamoto in 2008 as a center part of the digital currency Bitcoin, which
generally populates records for all exchanges like a public ledger.
How it works?
Not every blockchain works in a similar way. For instance, they can contrast in
their agreement mechanism, which are the rules by which the technology will update the ledger. We have already discussed
that it is a distributed ledger on which new transactions are logged in a blocks. And each block identified by a
cryptographic hash of that data. The similar hash will always result from that data, but impossible to recreate the data
from hash. Correspondingly, if even the smallest detail of that transaction data is changed, it will create a different
hash and since the hash of each block is included as a data point in next block, resulting block would also wind up with
different hashes. This is the things that makes the ledger sealed.
At last the security comes from the fact that multiple computers called nodes stores the blockchain. So to modify the
ledger, one would need to gain control at least 50% of computing power, which is very difficult especially for a public
blockchain like Bitcoin.
The basic concept of blockchain is quite simple. A distributed database that maintains a persistently growing list of
Public Blockchain & Private Blockchain
A public blockchain is a platform where anyone able to read or write to the
platform, provided they are able to show proof of work for the same. This a fully decentralized blockchain.
Financial companies have not prioritised decentralized blockchain. Bitcoin and many cryptocurrencies use open(public)
blockchain. As of September 2016, bitcoin has the highest market capitalization.
A private blockchain allows only the owners to have the rights on any changes that must be finished. This could be seen
as a similar version to the existing infrastructure wherein the owner (a centralized authority) would have the power to
change the rules, revert transactions, etc. based on the need. Private blockchains lack transparency. If you could attack
or damage the blockchain creation tools on a private corporate server, you could effectively control 100 percent of their
network and alter transactions however you wished.
Blockchain technology has a large potential to transform business operating
models in the long term. Blockchain distributed ledger technology is more a foundational technology with the potential to
create new foundations for global economic and social systems than a disruptive technology, which typically attack a
traditional business model with a lower-cost solution and overtake incumbent firms quickly. Even so, there are a few
operational products maturing from proof of concept by late 2016. The use of blockchains promises to bring significant
efficiencies to global supply chains, financial transactions, asset ledgers and decentralized social networking.
Blockchains technology can be integrated into multiple areas. This means specific blockchain applications may be a
disruptive innovation, because substantially lower-cost solutions can be instantiated, which can disrupt existing business
models. Blockchain protocols facilitate businesses to use new methods of processing digital transactions. Examples include
a payment system and digital currency, facilitating crowd sales, or implementing prediction markets and generic governance
Major applications of blockchain include cryptocurrencies including bitcoin, BlackCoin, Dash,
and Nxt and blockchain platforms such as Factom as a distributed registry, Gems for decentralized messaging, MaidSafe for
decentralized applications, Storj for a distributed cloud, Sia for distributed storage, and Tezos for decentralized voting.
Frameworks and trials such as the one at the Sweden Land Registry aim to demonstrate the effectiveness of the blockchain at
speeding land sale deals. The Republic of Georgia is piloting a blockchain-based property registry. The Ethical and Fair
Creators Association uses blockchain to help startups protect their authentic ideas.
New distribution methods are available for the insurance industry such as peer-to-peer
insurance, parametric insurance and microinsurance following the adoption of blockchain. Banks are interested in this
technology because it has potential to speed up back office settlement systems. The sharing economy and IoT are also set to
benefit from blockchains because they involve many collaborating peers. Online voting is another application of the
blockchain. Blockchains are being used to develop information systems for medical records, which increases
interoperability. In theory, legacy disparate systems can be completely replaced by blockchains. Blockchains are being
developed for data storage, publishing texts and identifying the origin of digital art.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.
Benefits of Blockchain Technology
- Current payment systems require third party intermediaries that often charge high processing fees, however machine to machine payment
using the Bitcoin protocol could allow for direct payment between individuals as well as supports micropayments.
- As it is a public ledger system, blockchain records and validates every single transaction made, which makes it secure and
- Every transactions made are approved by miners, which makes the transaction permanent and keep it from the risk of hacking.
- Blockchain is the decentralization of the technology.
Now banks and several financial institutions have also been active in
investing in this area. Banks in India have started utilizing blockchain for transactions however it is as yet
infrequent. ICICI Bank, YES Bank, Kotak Mahindra Bank, and Axis Bank have utilized it for vendor financing and
international trade finance.