Blockchain Explained: How it can change our Society
• What is Blockchain?
A Blockchain is a fixed record of data that a cluster of computers manage. It is not controlled or owned by any central authority. These blocks of data are bound and secured with each other through cryptographic principles.
What makes Blockchain different from the rest? It comes with the following features.
• It has an open system. There is no central authority.
• Data records are available for anyone to see.
• Transparent system. People are accountable for their actions.
A group of people by the name of Satoshi Nakamoto came up with the concept of Blockchain in 2008. A hashcash-like method got implemented to record blocks without the need for a trusted party. A difficulty parametre got introduced to stabilize the rate through which blocks are getting added to the chain. This design got implemented as a core feature of cryptocurrency bitcoin. It serves as a public record for each transaction on the network.
• Here are some of the statistics regarding Blockchain
• Bitcoin Blockchain file size reached 20GB. It consisted of each record of transactions on the network.
• The file size reached 30 GB by 2015.
• Bitcoin blockchain reached from 50GB to 100GB in size from January 2016 to 2017.
• Blockchain achieved 13.5% adoption rate in the financial services of 2016. A global blockchain forum got created by Industry trade groups in 2016. Blockchain reached the early adopter’s phase.
• The initial document of Satoshi Nakamoto indicated that the words block and chain were separate. The single word “Blockchain” got famous and finally accepted in 2016.
• How Does Blockchain work?
Each chain of blocks has data. These blocks have data from earlier blocks, transaction data, and a timestamp. The basic design prevents data from being tampered.
Blockchain technology records the transaction between you and other people. Blockchain gets managed on peer-to-peer networks, and they work to approve new blocks.
The data gets sent to the block after it gets recorded. Updating a block requires permission from the entire network because you cannot update it without changing others. It makes blockchain technology safe and prevents any potential hacking.
• Are Blockchain networks private?
Information is open to everyone in Blockchain. You can connect your computer to its networks in the form of nodes. The user’s computer, after it is connected, will receive a blockchain’s copy, which will update after a new block is getting added.
The network has blockchain copies of each computer. It means that the system has thousands of blockchain copies and even millions with Bitcoin. The blockchain copies are similar, although harder to manipulate as the data is getting spread across the computer networks.
User’s data is limited to their username or digital sign, and it gets hard to recognize them during a transaction. Blockchain and its networks are hard to trust because we don’t know who is adding blocks to it.
• Bitcoin and Blockchain
Blockchain’s digital data can get recorded and distributed, although they cannot get edited. W. Scott Stornetta and Stuart Haber outlined blockchain technology in 1991. They wanted to design a system that would prevent tampering of document timestamps. Blockchain’s first real-world application was Bitcoin, that got launched in January 2009. Blockchain got used to create the Bitcoin protocol. It is being called the new cash system with a peer-to-peer connection and no third party involvement.
We will explain how it works. Blockchain comes into place when you want to spend your bitcoins in shopping. No one controls Bitcoin, a network of computers verify its transaction. We call this process decentralization. When you pay through bitcoins, computers compete to confirm the purchase in the Bitcoin network. To confirm the purchase, users will execute a program and will attempt to solve a hash, which is an intricate mathematical problem. If a computer solves the problem, the algorithmic work will verify the block’s transactions. This transaction will get recorded and stored as a block. This block will be unchangeable at this point. Computers get rewarded with cryptocurrency when they verify blocks. We call it mining.
Unlike transactions, user’s data does not get recorded. You need to run a program called a wallet to conduct business on the bitcoin network. The wallet has two distinct keys, one is a private key, and the other is a public key. Transactions get deposited and withdrawn from the public key, which acts as its location. Blockchain ledger uses this key as users’ digital signature.
You cannot withdraw bitcoins from your private key. A public key gets created through an intricate mathematical algorithm. Because of this algorithm, you cannot generate a private key from a public key. Hence, we call blockchain technology confidential.
• Use of Blockchain application
Blockchain can store data for other types of transactions too. It can store data about votes for a candidate, supply chain stops, and property exchanges. According to Deloitte, which surveyed around 1,000 organizations in seven countries:
• 34% have adopted the blockchain technology in their business.
• 41% plan to deploy it within the next 12 months.
• In the survey, approx 40% are planning to invest 5 million or more in the blockchain technology.
In this section, we will explore the applications of blockchain technology.
Blockchain can store the patient’s medical records. We cannot change these medical records. Through private keys, patients can encode and store their health records. These records are accessible by the patients and his/her relatives only, which ensures privacy.
The banking industry will benefit the most by integrating blockchain technology into its services. Blockchain can speed up the process of verifying transactions, which right now takes two to three days. Blockchain will complete the process in 10 mins.
Banks will be able to transfer funds between organizations securely and quickly. European bank, Santander, saved approx $20 billion a year. According to French consultancy, Capgemini, Customers can save approx $16 billion in insurance and banking fees each year with the help of blockchain applications.
3. Property Records
Recording property rights is inefficient. In the current process, you need to provide a physical deed to a government employee, and they will store it into the county’s public index and central database. This process is full of human error. Inaccuracy can make it difficult for people to prove their ownership. Blockchain can eliminate this problem by storing and verifying the information into its network, which you can trust as this information will be permanent and accurate.
Blockchain has spread its services across the network of computers. It allows bitcoin and other cryptocurrencies to operate with no central authority. Blockchain eliminates transaction and processing fees. It gives stable currency for those who are living in a country with unstable currency.
People can manage the business with a broad network of institutions and individuals. The value of their currency won’t be at risk if their country or bank collapses.
5. Smart Contracts
Blockchain can use smart contract to promote, negotiate, or verify a contract agreement. Blockchain will carry out the terms of the agreement if the user has agreed to the set of conditions.
Blockchain can eliminate election fraud. It will store each vote in its block, which will prevent tampering of these votes. The electoral process will have transparency, and authorities can declare results with no lengthy process. Blockchain will also reduce the cost of conducting elections.
7. Supply chain
Blockchain can be useful in recording the sources of materials that suppliers have purchased. People can verify the authenticity of the products. As per Forbes, Blockchain is getting used by the food industry to keep a check on the path and safety of food from farms to consumers.
• Blockchains Advantages and Disadvantages
• Excluding third-party verification reduces the total cost.
• Transactions are private, secure, and efficient.
• Technology is transparent.
• Impossible to tamper due to its decentralized characteristics.
• Better accuracy as there is no human involvement in the verification.
• Transactions are low per second.
• Vulnerable to hacking.
• Bitcoin mining has a high technology cost.
• Widespread use in illegal activities.
Future of Blockchain
Blockchain has come under widespread public scrutiny. Industries around the globe are observing Blockchain’s capabilities and its future. It is making a name for itself because of cryptocurrency and bitcoin. Blockchain has proven itself in making operations efficient, accurate, and secure. When will organizations and governments get to accept this technology? We can still speculate on that.