Recently we have encountered a term called Blockchain mainly due to the sudden spike in the value of Bitcoins which uses the blockchain technology. Blockchain was conceptualized by Satoshi Nakamoto, whose identity is still unknown, when he released the whitepaper.
Blockchain is basically a distributed ledger that is opened to everyone. It is a continuously growing list of records called blocks and are secured by cryptography which is a technique of securing the data from being altered. Each block contains data, its hash and hash of the previous block.
“Hash” is a function that is used in cryptography. It identifies the block with its contents and is always unique. Any alteration in one block will make all the other blocks invalid, this will ensure the security of a blockchain.
Blockchain stores the information across the network of personal computers making them not just decentralized but also distributed. When two parties are involved in any transaction using blockchain, it leads to the formation of “Smart Contracts” which self are executing contracts regulating the terms of agreement between the parties involved in a transaction. As defined by Goldman Sachs, “A smart contract is a piece of computer code that describes a transaction step by step”.
The network can validate the transaction through different mechanisms, but mainly it is through a “proof-of-work. A proof-of-work is basically a computationally intensive mathematical problem that needs to be solved in order to facilitate transactions in a blockchain.
For example, in case of a bitcoin, participants, also called miners involved in a transaction needs to solve complex mathematical problems in order to add a block, which in turn require a ton of energy and hardware capacity to be decoded. Miner quickly solving the problem is rewarded with a bitcoin in case of bitcoin mining.
We have already witnessed the role of blockchain in the trending cryptocurrency bitcoin but it can also be implemented across various sectors such as real estate, Education, Health, Banking & Finance etc.
In India, states such as Andhra Pradesh & Telangana are planning to integrate the blockchain into its Land Registry System. Swedens blockchain- powered land registry system is also inching towards reality. Six major banking corporations including Barclays, Credit Suisse, HSBC, MUFG, Canadian Imperial Bank of Commerce and State Street have joined UBS, BNY Mellon and others to partner to create a new cryptocurrency .
Blockchain is expected to penetrate each & every sector in near future due to its non reliance on intermediaries which reduce the time as well as cost. As we are heading towards a digital revolution, blockchain along with the Artificial Intelligence will definitely lead to a technological shift!
Vimmy Dembani is a Certified Credit Analyst, Blockchain Enthusiast and writes on Fintech Topics like AML (Anti Money Laundering)