Block chain, how does it matter ?
We are dependent on banks for financial transactions, we trust them with all our money; banks record and update transactions as they happen, we trust the banks to keep these records safe and away from any kind of illegal modifications. Bank is a trusted record keeper everyone relies upon to make and record transactions as they happen.
Banks here act as a book keeper who keeps track of the transactions.
Block chain system cleverly eliminates the need of a bank.
It began on October 31st 2008 ; A cryptography buff who goes by the pseudonym Satoshi Nakamoto unveiled a crypto currency project called Bitcoin. It was a new electronic cash system that is fully peer-to-peer.(more like BitTorrent).
Crypto currency is a robust system that could function without the backing of any powerful organizations like governments, banks and Card Providers like.
Block chain, the underlying technology that facilitate bitcoin is a giant ledger that keeps track of who own how much of bitcoin. The coins are not physical objects, they are the entries in a block chain ledger.
Owning a bitcoin is simply a claim on a piece of information what is sitting on the block chain.
To this stage the system is very similar to how a bank works, the similarities end here.
Unlike the banking system, which is private and centralized, The block chain is public and is distributed in the internet. This enables anyone to download a copy of it. The identities of the crypto currency owners are protected by clever use of cryptography. Each owner has an unique address that cannot be traced back to the owner. The ledger is essentially a record that shows how much bitcoin each address is entitled to.
The ledger holds the record of of every transaction that was made since the inception of a particular crypto currency, the size of the ledger increases with each transaction made. New blocks of transactions are added to a growing chain of transactions.
On a stark contrast to the banking system a central bank is not needed approve each transaction. Rather, a large number of computers dedicate themselves to keep the system running. These systems are know as crypto currency miners. A personal computer can be converted to a crypto currency mining rig just by using specialized software.
In fact,many individuals turn to crypto currency mining for a part time income as the owners are rewarded significantly ;There are individuals who run large data centers that authenticate transactions in the block chain. These systems authenticate transactions by reaching an agreement on what the latest version of block chain must look like. They are rewarded with significant amounts of crypto currency for each transaction they authenticate.
The information in a bank ledger can be altered by the bank, anyone who illegally gained access to the banks data-centers can also tamper with the data.
This is not the case with crypto currency, since a new entry to the ledger is not validated unless a majority of the miners( There are tens of thousands of them) reach an agreement on how the updated version of the ledger must look like. To tamper with the system someone would need to hack into more that half of the mining rigs that are present in the system which is virtually unlikely.
This kind of approach will create a disruption if not a metamorphic transformation to the current financial market.
