Blockchain — Will it bring an end to the middlemen role?
Blockchain became talk of the town after thumping success of BitCoin during early 2018. Most of those who heard about the rise of the cryptocurrency were excited to know more about it and did even invest in it for considerable profits, while others who were confused were watching it closely to ensure that it was safe and was not a trap.
Well, irrespective of the industry’s reaction towards BitCoins or other similar digital currencies, BlockChain was certainly exposed to the world as a potential new technology. I came across a request from one of my friends to know more about BlockChain. I am sure my article below will help many to understand the basics of BlockChain.
What is Blockchain:
Blockchain in a simple language can be referred as a chain of blocks those contain information in them. This technique was discovered first in 1991 to timestamp digital documents. Idea was to make documents secure against any tampering in the documents.
Satoshi Nakamoto utilised this technology in 2009 to create digital crypto currency called Bitcoin. Blockchain is indeed a distributed ledger that is open to all. They have an interesting property and that is; once the data is recorded inside a blockchain it becomes very difficult to change it. Every block in a blockchain has three elements assigned to it.
Data, Hash and Hash of Previous Block.
Type of Data or information stored inside a particular block depends on the type of the blockchain. A bitcoin blockchain for example stores the information of the transaction happened between receiver and sender of the bit coins.
Hash is a sort of unique encrypted key or a finger print and ensures security of the block and its information. Hash identifies a block and all its content and it starts existing immediately after a block is created. Since hash of a block is unique hence changing anything in the block will change its hash. This reveals that hash is one very important information while one wants to check for any change in any block of a chain. If the Hash of a block changes, then it is no longer that same block.
Hash of the previous block is the third element associated with a block in a chain. Different blocks in a chain get connected to each other with a practice of having hash of previous block referred to the upcoming block in the chain. This indeed is one factor which makes the chain secured in its nature.
But computers these days are fast enough to calculate thousands of hashes per second. One can effectively tamper with a block (thus changing its hash though) and may recalculate all the hashes of the block to make the chain valid again. To save such a gap, blockchains have something called “Proof of Work” which makes it more secure by making the mechanism of creation of new blocks slower. It can take as long as 10 minutes to calculate the required proof of work and add a new block in the chain. This makes the tampering and validating of the whole chain a long process.
Apart from Hash and Proof of Work mechanism, Blockchains secure themselves by being distributed. Blockchains are decentralised and is open for anyone to join in. When anyone joins a blockchain network, he gets a whole copy of the blockchain. Every user having a copy of blockchain with him is referred as a node and holds an authority to verify the authenticity of a chain.
Every user having an access to a block chain can create a new block. If anyone does so, this new blocks is then verified by everyone in the network. Users then confirm that the new block is not tampered and can be accommodated. if everything goes well, then every node / user adds this block to their own blockchain. Block if is tampered is rejected by other users in the network.
This leads to the established knowledge about the security of a block chain. To tamper a block and make the chain still valid requires changing all the hashes of all the blocks in the chain then redo the proof of work for each block and then get an approval from minimum 50% of the nodes / users about its validity. All this is almost impossible to achieve. Such security as offerd by blockchain has made it popular among technocrats.
Bitcoin is not the only industry which is currently using BlockChain for safer transactions. There are other industries which have already started using the potential of Blockchain now. Few of them are for storing medical records or creating Smart Contracts for Land Titles or for Govt documentations.
When the technology will groom to its maturity, most of it will be used to track the previous records of any transaction. For example if a land title has to be transferred then instead of consulting the hard copy books or checking with lawyers about the property’s testimonies, blockchains will be the safest and most reliable way of confirming the previous records.
Yugasa Software Labs is working on Blockchain technology quite aggressively and welcome startups to discuss their thoughts and business ideas with us.