Unless you have been living under a rock, you would have come across the term ‘BLOCKCHAIN’ or ‘BITCOIN’ at least once in the past few years. It is a disruptive technology that’s changing the way traditional businesses operate. It is as disruptive and fundamental as the Internet itself!
So, what is blockchain?
Simply put, a blockchain is a distributed and decentralized ledger that holds transaction data.
If it is so simple, what makes it so disruptive in nature?
Traditional systems: Imagine a traditional banking transaction. When an entity transacts through a bank, it trusts the bank’s verification and validation process and the bank acts as a single source of truth. This is true in case of any centralized system like Facebook, Amazon etc., In these cases, the trust is provided by the central authority.
Shortcomings: However, centralized systems have disadvantages like Single Point of Failure (Hacking) and Single Point of Authority (Decisions by the central authority)
In Blockchain: If the same transaction is carried out in a blockchain, we eliminate the need for the central party (bank in this case). Verification and validation performed by the bank are now performed by the parties involved in the network itself. This is the beauty of a decentralized system where we eliminate the need for a central authority and trust the system and technology instead of an entity. Now the technology acts as the source of truth and not a particular party.
This one property called Decentralization has the power to democratize and change the way transactions are carried out in the world.
Decentralization is one of the various reasons why blockchains are revolutionary.
Other properties of a blockchain like security, immutability, transparency, consensus, etc.will be discussed in further posts which will explain how this kind of a decentralized system is achieved.
Planning to post multiple articles each discussing one small topic on blockchain. Feel free to comment if there is a disagreement with any of the above points. I love to discuss Blockchain !!