Understanding Blockchain Technology

Ever since the inception of the information era, we notice cutting edge innovations
through all sectors aimed at making our day to day life easier, wherein money
transactions play a major role. Although, there are numerous software applications
and internet services which make online transactions easier throughout the globe,
we notice that moving our financial assets from one place to another goes through a
time consuming unreliable process as it uses antiquated systems which are expensive
and could endanger our assets. To solve this issue, Blockchain was introduced to
restructure business transactions and to introduce better, faster and reliable
forms which can be accessed and moderated digitally.
“Blockchain was born to provide legitimacy to its Bitcoin master after the
financial cataclysm of 2008. At its heart is a rebellious disdain for central
authoritative control, offering instead a decentralized network of self-compliance
and regulation. But the servant has become the master, offering business benefits
not envisaged during its conception. In fact, it’s nothing short of a game changer
for those who can master it.” – Steve Treagust, Global Industry Director for
Finance, HCM & Strategy.
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What is a blockchain?
“The blockchain is an incorruptible digital ledger of economic transactions that
can be programmed to record not just financial transactions but virtually
everything of value.” Don & Alex Tapscott, authors Blockchain Revolution (2016).
Bitcoin and Blockchain:
Bitcoin also known as ‘Virtual Gold’ or ‘Cryptocurrency’, is the first
decentralized form of virtual currency system that allows online money trading
without any bank or a single administration. All these transactions are registered
in a ledger that is publicly available, to ensure security and authenticity. The
technology that keeps this process functioning without any requirement of an
intermediate is the blockchain. Although, these two words been used in the same
context and are connected, they refer to two completely different things.
How does a blockchain work?
Any Bitcoin trade happening between two parties is registered in a ‘Block’
comprising details like the source, destination, time and date. A single block
registers similar transactions for a span of ten minutes depending on the specific
blockchain and its configuration. These blocks combined form a Blockchain which is
a data structure used to curate and share a ledger of all the transactions
digitally. The technology facilitates fast, secure and transparent peer-to-peer
transfer of financial assets allowing users to immediately make and validate the
transactions virtually.
“As revolutionary as it sounds, Blockchain truly is a mechanism to bring everyone
to the highest degree of accountability. No more missed transactions, human or
machine errors, or even an exchange that was not done with the consent of the
parties involved. Above anything else, the most critical area where Blockchain
helps is to guarantee the validity of a transaction by recording it not only on a
main register but a connected distributed system of registers, all of which are
connected through a secure validation mechanism.”
– Ian Khan, TEDx Speaker | Author | Technology Futurist
Public and Private Blockchain
Public Blockchain
A completely decentralized platform where anyone can create and verify
transactions. Using Crypto-economic (A combination of economic incentives and
cryptographic verification), only the valid transactions are later register in the
ledger.
Private Blockchain
A private blockchain however, is centralized to one organization. The system
controls access and permissions and only the central authority has the right to
modify. Such a system will ensure an increase in validation efficiency and
reduction in the transactional cost.
Benefits of Blockchain
Understanding and utilizing the blockchain technology efficiently has proven to be
very advantageous. Listed below, are the most prominent benefits of the Blockchain
as per Steve Treagust.
Transparent
Commercial transparency can sometimes lead to delays in business transactions and
might cause a breakdown in relations. Blockchain provides every detail related to
the transaction unlike any other platform, to build trust in the process leading to
a stable relationship based on transparency.
Secure
Every transaction made is verified within the network using complex cryptography.
The security system used by the Blockchain can assure the authenticity of the
information ensuring secure transactions without any form of disruptions.
Efficient
Transactions between two parties are fast and completed without any intermediary
interventions. Also, each transaction is stored in the form of digitalized
information which makes sending and moderating easy and quick. The added ability of
being able to operate on ‘smart contracts’ which automatically triggers commercial
actions based on the contract laid out, streamlines processes and results in saving
times and cost from transacting.
Auditing
As every transaction is recorded and verified, it provides an enduring audit trail
for the life of an asset between parties. This plays a vital role in verifying the
authenticity of assets.
Tracing
Being able to track assets or goods on the move is crucial in supply chain
management. Access to information related to the current location of the goods and
other components can help in taking action to process the transaction faster and
without complications.
Feedback
Having access to the transaction details and being able to trace the assets
throughout its lifetime could help when circumstances demand information exchange
between the two parties amid or after the transaction. This facility helps in
maintaining an asset and giving suggestions post a transaction and for further
deals.
Industries using Blockchain Technology:
Although, blockchain technology dominates the finance and banking sectors catering
to organisations like Deutsche Bank, US Federal Reserve, Barclays Bank, Citigroup
and NASDAQ, it is can be used in many other sectors involving virtual transaction.
In the digital era, where our basic necessities are taken care of virtually;
Blockchain Technology can change many markets due to its efficient, transparent and
cost effective quality. Few of the key sectors it could make an impact on are
Healthcare – Electronic medical records, Entertainment – gaming and music
streaming, Manufacturing – Supply chain management), Commodities – Diamond, gold,
silver & metals, Data Management, Cannabis, Digital Content, Network Infrastructure
and Market forecasting.