Blockchain and Technological Revolution - An understanding

Blockchain is an emerging concept which has been introduced in the year 2008 by a group of persons using the name Satoshi Nakamoto.

Blockchain refers to the process of recording transactions in a digital form. A blockchain is a decentralized system where persons trading in any cryptocurrencies can have access over their individual transactions.

Normally transactions in the traditional system are a centralized process whereby only banks or other financial intermediaries can record those transactions in a separate ledger. Whereas blockchain means that a separate ledger is maintained whereby all the transactions that take place from peer to peer are recorded.

It is the most convenient way of recording transactions as it doesn't require any interference of third parties such as banks or any kind of financial intermediaries or institutions. Any person can transfer bitcoins digitally to other persons residing in any part of the world, and all these transactions are recorded in a separate ledger.

How Blockchain and Database are different?

1. Centralization:

A blockchain is a decentralized form of recording transactions that helps to communicate and share information with the help of consensus algorithms. Also, there is no need for centralized authority which makes the whole system trustworthy when compared to other networks. 

A database is a centralized form of recording transactions wherein it is run by an administrator and it makes the system more complicated. There may arise many omissions or commissions while recording the transactions as it is run by an administrator. All the data which is stored in the database can be queried using Structured Query Language. 

2. Transparency:

Blockchain is transparent as all transactions that take place between peers to peers can be easily visible at one go.

But in case database transactions are not transparent in nature as only the administrator can have access over it and he decides which information is to be disclosed to the recipients. 

3. Complexity:

A blockchain is a form of network that builds up with various other networks, it is a complicated process and very difficult to use it as many persons could not access it in the right way.

The databases can be used by people as it's process is simple and clear and is easily understandable to the public at large. 

How Blockchain is implemented?

Bitcoins:

Blockchain technology leads to the innovation of Bitcoin. The new revolutionary technology can be used for all transactions where the value is involved. Blockchain stores information in blocks and it is shared by everyone who is connected to the block for executing transactions. Thus bitcoin blockchain will have all the past details that many of the users may access. 

Transforming Trading Platform:

Blockchain technology has powerful mechanisms to transform trading platforms into an efficient manner. With blockchain technology, there will be no need to maintain the same records of brokers, dealers, intermediaries, etc. The distributed ledger provides the parties with transactions to have access to the same data at the same time. 

Insurance Sector:

Blockchain technology is useful in the insurance sector. It may change the pattern of dealing with clients. They may replace legal contracts with a small contract by embedding the distributed ledger mechanisms. Digitally enabled settlements in blockchain create transparency, efficiency, and responsiveness in managing the claims of the customers. Potentially these chained contracts help reduce fake claims. 

Blockchain is very helpful for business as it elevates a level of trust between the parties. It allows participants to work together without any additional guarantee. Entities working in the same organization tend to trust each other because they are unified by the same goal of making the company succeed. 

How the process of blockchain works?

Firstly it is built up of blocks and each block has three basic elements:

. The data in the block. 
. A 32-bit whole number called a nonce. The nonce is randomly generated where a block is created, which then generates a block header hash. 
. A hash is a 256 number wedded to the nonce. It must start with a huge number of zeroes. 

When the first block of a chain is created, a nonce generates the cryptographic hash. The data in the block is considered signed and tied to the nonce and hash unless it is mined. 

Secondly, the mining process takes place which is done by miners. Mining is a record-keeping service done through the use of computer processing power. Miners keep the blockchain consistent, complete, and unalterable by repeatedly grouping newly broadcast transactions into a block which is then broadcasted and verified by recipient nodes.

Thirdly, nodes help in building up the network wherein a series of transactions that take place are recorded in the blockchain and the nodes help to connect the networks of various blocks. 

What are the advantages of blockchain?

. Blockchain is a highly secure system due to its digital signature and encryption. This system is secure, convenient, and tampers proof. No fraudulent activities take place as it is much secured in nature and nobody can have access over it.

. It can carry out millions of transactions in a second, it is much efficient and flexible in nature, it can carry out the process within a short span of time. 

. As it is a decentralized system no payment of fees is made to the intermediaries.

. The validity of transactions is checked and confirmed by participants, this they also confirm their own authenticity. 

What are the disadvantages of blockchain?

. It is very difficult to eliminate errors or to modify added data

. The application must be updated on each node of the peer to peer network.

. Since there is no central authority that assures the identity of users the development of certain decentralized apps can become a consensus problem.

. It may become a home for illicit activities. People generally utilize this platform for carrying out fraudulent activities.

. The underlying use of blockchain technology is huge. It requires a lot of investment from the organization that is willing to pursue it. These are costs associated with hiring developers, managing a team that excels at different aspects of blockchain, licensing costs, if you opt for paid blockchain technology.

. Implementing and managing a blockchain is hard. It requires thorough knowledge to go through the whole business process. 

Thus it can be said that,

"The use of blockchain technology is revolutionary"

It will make life easier and simple. The use of blockchain is really very secure and it lets you make sure that money comes and goes to the right person. Obviously, it may have disadvantages but with the passage of time, it will be very convenient for everyone and will be used by a large number of people. 

Writer: Sudeshna Paul

Editor: Sonal Kamble