What is Blockchain Technology? Why there is so much hype?

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Howdy, Digital People! 

Here’s your Digital Tomorrow

Many of you might have heard this term ‘Blockchain Technology’, but only few might have realized that this technology will revolutionize many Industries in the near future. This technology is making lot of  noise than any other technology in the past and undoubtedly it will be our The Digital Tomorrow

 

The Blockchain Technology traces back to 2009, when the open source crypto currency ‘Bitcoin’ was published by Satoshi Nakamoto, an anonymous developer ( Recently a person by name Mr Craig Wright of Australia, claims that he is  Bitcoin Creator Satoshi Nakamoto – It’s still in the process of authentication). Bitcoin application is built on Blockchain Technology platform.

 

What is Blockchain Technology?

 

Blockchain Technology is referred as a record, or ledger, of digital events, & can be “distributed” or shared between many different parties. It can only be updated by consensus of a majority of the participants in the system & information once entered cannot be erased & its fully transparent and available to all.

All transactions has to be authenticated using a private key, it prevents third parties from tampering it. Transactions are confirmed by the network within few minutes and this process is handled by Miners. The Miners use specialized and easily available software along with the processing power of their computers to verify the transactions. Mining is used to confirm transactions through a shared consensus system, and usually requires several independent confirmations for the transaction to go through. This process makes tampering very difficult.

Source:-Yevgeniy Brikman
Source:-Yevgeniy Brikman

You can download this research report here

The Blockchain begins to take shape from here, every few minutes a ‘block’ of all the transactions occurring over the network is created by a Miner. Essentially the Miner  creates a verified transaction file which holds a copied record of all the transactions that have occurred in the network over the past 10 minutes. The miner uses the computational power of the computer to assure that there is no problem of double spending.

The data stored can be a token of value. So the blockchain acts as an alternative value transfer system that no central authority or potentially malicious third party can tamper with (because of the encryption process) & the mathematics involved are complex, and the use of hardware to construct this vast chain of cryptographic data renders it practically impossible to replicate.

 

Advantages of Blockchain Technology

 

The core reason and the main advantage why Blockchain Technology is gaining traction is because of  Decentralized. Decentralization consensus breaks the old paradigm of centralized consensus — i.e., when one central database used to rule transaction validity.

In this decentralized scheme, transfers authority and trust to a decentralized virtual network and enables its nodes to continuously and sequentially record transactions on a public “block,” creating a unique “chain”: the blockchain. Each block contains a “hash” (a unique fingerprint) of the previous code; therefore, cryptography (via hash codes) is used to secure the authentication of the transaction source and removes the need for a central intermediary. The combination of cryptography and Blockchain Technology together ensures there is never a duplicate recording of the same transaction.

Source:-Forbes
Source:-Forbes

Smart contracts:-  Smart contract is a program that everyone can  entrust with a unit of value (as a token or money), and rules around that value. The basic idea behind smart contracts is that a transaction’s contractual governance between two or more parties can be verified pro-grammatically via the blockchain, instead of via a central arbitrator. There is no need to depend on a central authority, when two (or more) parties can agree between themselves.

Proof of work:- Proof of work is a key building block because it cannot be “undone,” and it is secured via the strengths of cryptographic hashes that ensure its authenticity.

 

Impact on Financial Industry

 

Blockchain Technology will disrupt the Industry

Currently every financial transaction done online relies on a central trusted authority (Ex: Banks/financial institutions). All the financial transactions has to be authenticated by a third party & has to be recorded in the ledger. This process consumes time & money. This is where Blockchain Technology will be effective.

Using Blockchain Technology, financial industry would have tremendous benefits; it can radically reduce costs for banks, providing a boost to productivity and making it easier to offer products and services to global customers. Currently settlement times for many financial products take days, sometimes weeks, tying up capital and exposing industry participants to huge counterparty risks. Blockchain can simplify many business processes, reducing risk and boosting transparency.

Financial institutions are exploring a variety of opportunities to use blockchain, including applications to improve and enhance currency exchange, supply chain management, trade execution and settlement, remittance, peer-to-peer transfers, micropayments, asset registration, correspondent banking and regulatory reporting.

In 2015, Santander (creator of Bitcoin) issued a report estimating that blockchain could reduce banks infrastructure costs attributable to cross-border payments, securities trading and regulatory compliance by between US$15 – 20 billion per annum by 2022.

Bitcoin

 

Blockchain is currently the provider of the world’s most popular Bitcoin wallet. Using Bitcoins people can make peer-peer transactions without the involvement of any third party & also it consumes lesser time. The biggest advantage is that the transactions can be carried out worldwide & people will end up paying less brokerage compared to any financial institution. Bitcoin has State-of-the-art encryption and security keeps it safe. With a Blockchain wallet, no one but only the owner can access his/her Bitcoins.

 

Bitcoin’s basis is cryptography, it’s not a currency, not a way of sending messages but in fact, it solves the problems i.e securing online transactions — it makes sure that people can’t steal from one another, or impersonate one another. In the physical world, security is achieved with devices such as locks, safes, signatures, and bank vaults. In the world of bits, security is achieved with cryptography. And that’s why Bitcoin is at heart a cryptographic protocol.

 

Security

 

The most important thing in financial industry is the security. The Blockchain Technology can change the existing security model. The encryption keys are handed over only to people that are allowed access a certain information. If any fraudster wants to make any change to the distributed ledger, it cannot be done unless the fraudster also controls 51 % or more of the participants on the network, which is next to impossible in the case of any large network.

You can download this research report here

 

After reading this blog, I hope you have got basic idea about the Blockchain Technology. Please share your experience below in the comments Section.

 

 

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