Over the past decades technology has constantly upgraded itself and is reshaping to match the future. If we look back in time over last 5 decades we can clearly see the shift in technologies. Advent of Mainframes as computing machines in 1970s to evolution of personal computing machine i.e. PC in 1980s, then came the world wide web in 1990s, social media & mobile boom in 2000; now is the era of artificial intelligent and connected systems.
In recent times the words Bitcoin and Blockchain have been making news for various reasons. For a commoner the question remains what is Blockchain?
Many a times Blockchain is equated to Bitcoins or just a crypto currency but it is not true. Blockchain is the foundation on which multiple application are built and can be built. Bitcoin is one of the first and most popular application which brought this blockchain concept in to limelight. Origin of this concept is attributed to a white paper published in 2008 by Satoshi Nakamoto which some believe to be a real person or an anonymous group of person/s. Who has gone great lengths to keep the identity secret. Satoshi Nakamoto the Creator of Bitcoin is believed to have worth of approximate $ 7Billion by November 2017!
To put Bitcoin and Blockchain in to perspective Sally Davies (Financial Times reporter) says “Blockchain is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one.”
A Blockchain by definition is a decentralized, distributed digital ledger. It is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and thereby making it secure.
Blockchain consists of two types of records
Blocks that contain the batches of valid digital transactions that are encoded in to a structure called as Merkle Tree (Cryptographic Hash function). A link is maintained between connected blocks by holding a hash of previous block. And the structure keeps growing with each new node, digital transactions being created.
In simpler terms it is a stack of blocks ever growing in numbers linked in a certain type of network which is secured by a key. Each new block is linked to previous block by a hash total and a timestamp. It is a mega data base that can record digital transactions efficiently. This is a database that keeps continuously updated digital records of who owns what rather than having a central administrator system in traditional database.
There can be two types of Blockchains namely Private and Public. Privately held blockchain is like an intranet limiting it only to the members of the group. Public blockchain is open to everyone like an internet network and accessible to anyone. In both the cases a blockchain is typically managed by Peer-to peer network collectively adhering to a protocol for verifying new block that gets added to the chain.
While centralized data is more controllable, information and data manipulation are common. By decentralizing it, blockchain makes data transparent to everyone involved. This very nature of blockchain makes it suitable for recording of events, medical records, and other records management activities, such as identity management, transaction processing etc.
Due to this inherent nature of blockchain it provides following advantages:
Blockchains are open, cryptographic protection and ease of operation will mean a great deal of decentralization of data and making it ever increasingly harder for a hacker to steal any data or manipulate any set of transactional data. If hackers really want to hack it then they have to not only hack the block to steal / change the data but also hack all the preceding connected blocks until the origin of that transactional data which would be a herculean task and effectively making it not worthy of hacking. This will deter the miscreants automatically away from the system.
Blockchain is a disruptive technology, make no mistake about it! It’s going to change the world of businesses where intermediaries are involved in a massive way. This will have profound impact on banking, finance, lending, mortgages, insurance, equities, real estate, healthcare, legal almost all the major areas as we know off today.
Well we don’t have definite answers to all but what we know today is just the beginning & the greater uses of this disruptive technology will evolve and surprise us. It promises to have massive impact and many of the exciting applications that are just either a concept right now or still to be conceptualized. This will certainly impact financial sector, payments, and global financial systems in unprecedented way.