An ingenious invention, Blockchain is a continuously growing log of records called blocks. These blocks are securely linked to each other by means of cryptographic methods. Each and every block comprises a cryptographic hash of its precursor, a time stamp and transaction data. The blocks grown constantly in a chronological fashion with more and more completed transactions. This allows all the users over that particular network, to keep track of every single transaction taking place without the need of any central authority to maintain a record book.
Blockchain was developed authentically as a system of accounting for Bitcoins. Blockchains use something popularly known as the Distributed Ledger Technology which helps in verifying transactions and recording documents, the authenticity of which is verified by the Blockchain community.
One could think of a blockchain as a system of shared documents in the same way that we share documents and files Google Drive. Both parties involved have complete access to the same complete information in the same given block of time. Also, the exact same version of the information is available to both the sides.
Technically, a “block” is the current part of a blockchain. This records a little or almost all of the transactions. Once the transaction is completed, the block is then moved into the “blockchain” thus forming a permanent database which cannot be altered. The genesis block is the first block that is created i.e. the block which records the first transaction. The complete blockchain has all the information about user addresses and their balances starting from this “genesis” block up till the recently generated block. Innumerable such blocks join together in a chronological linear arrangement to form a complete blockchain. Each block that becomes a part of an ever increasing blockchain is in simple terms a financial institution’s bank statement.
This blockchain is immutable i.e. it cannot be altered. The cryptography applied during rendering and addition of blocks ensures that no one else can meddle with it. It can thus provide understanding and information about actualities such as what was the value held by a particular address at some given point of time in the past, what recent developments have taken place, what recent transactions have pulled through and much more.
There are quite a few who have raised concerns regarding its storage and synchronization since a blockchain is ever growing by nature.
All of the data on this network cannot be copied but distributed. Transactions are broadcast and every node in the network creates an updated version of events. As a result, blockchain completely does away with the need of a trusted third party interference for digital transactions or relationships to be established.
A private key cryptography tool gives rise to a powerful ownership system that takes care of several requirements such as establishing authenticity over the network. The sole criteria to establish ownership over something is simply the possession of this particular private key. The added advantage of such a private key is that one need not divulge any more personal information than this, which could be asked for by hackers under the pretext of completing a successful exchange.
The next vital step required is authorization which requires a distributed peer-to-peer network. Recordkeeping, security, and reducing the risk of centralised misconduct are a few the distributed network should be committed to.
This idea of cryptographic keys and shared logs has everyone from the government to banks to IT firms and huge multinational companies wildly exploring reconfigured blockchain systems to fit their needs. This brand new transaction layer would easily replace the need for any dependable and incorruptible system or records.
Blockchain provides for a system which deliver accountability to its highest degree. No transaction can take place without the consent of both parties. Also, there is no scope of human error or machine error or even a scope of missed transactions. The data is transparent;y embedded into the network and made public to everyone on the network. A huge amount of energy would be required to over power the network and alter pre-existing information on the blockchain thus rendering into tamper free.
Blockchain technology when incorporated by companies and the government is a powerful tool to get rid of the usual blunder of having to pass documents amongst each other over and over again, losing track of the most recent and updated version of the document concerned, and not being in sync with it. It would save a huge amount of time and effort required in bringing all these versions in sync as everything would be readily provided to each and every part over the distributed network for reference and updations in real time.
There is not a single point of failure in the entire blockchain system. The Bitcoin blockchain till date has functioned regularly without rendering any faults or mishaps. Every issue that has arised in regard with this has been due to malicious activities or human error and not due to the existence of any faults in the underlying conceptualization of the technology. This technology also gives users the chance, for the first time ever, to actually own the data that belongs to them. Complete online identity is decentralized.
The power of blockchain technology is highly visible with applications like smart contracting, automated governance, streamlining of clearance and settlements, automating regulatory compliance. However, blockchain still has innumerable practical applications which have still not been explored. Since many of the blockchain reconfigurations are still in either their development stages or beta testing phases, the world is yet to marvel at the usefulness of blockchain technology. With more money being poured into blockchain oriented startups, these services and products would soon become mainstream.
Also read 15 myths on Blockchain.