Blockchain Say What?

The word “blockchain” is the new kid on the block, and every now and then there are new terminologies in technology that appear out of nowhere, and then a few years down the lane would change the way we do business.

What is Blockchain? Why do we need it?

In simple terms, blockchain is a series of blocks or ledger of records or transactions connected to each other by chains, called hash or decentralization or transparency or approval.

Technical details of the blockchain flow

Block

Block is the smallest and the most important element of blockchain, it is a collection of transactions or any information which can be represented as a page of a ledger, signed by a hash that verifies the authenticity of the transaction or information.

Hash

00000000000000000048bc8fc126f8f49cade1a5a89cdccfff5ce79e6f23e91d — this is how hash looks like! Hash is a programmed signature that is similar to a signature on a cheque. It is a combination of characters that is hard to remember, and generated by some cryptographic functions. It’s impossible to duplicate, unlike manual signature.

Hashing

A hash function generally takes some input and produces an output string(hash) which is then assigned to a block as its signature.

For example: Consider f(x) as the hashing function and x is any value, executing this function will return us a hash.

Note: No matter what the size of the input in the hash function, the output remains of the same length.

It is similar to downloading software and verifying the validity of the software using MD5 checksums.

Blockchain works in a distributed manner, every participant on that respective network has his own individual copies of the entire blockchain. Each block has a unique hash which is passed over to the future block. For example, the first block will have a unique hash, the second block will have the hash of the first block, then the third will have the hash of the second, and so on. In this process all the blocks are interconnected with hashes, thus making the blockchain super secure.

Hashing sample workflow:

 

Original Blockchain

Consider the above ledger, each block has unique transactions, and this blockchain is distributed to all others in the network. In case of any manipulation of existing transactions or information, the hashes will be updated on the current and further blocks, and the final hash will be completely different from that of other participants in the network. Hence, the blockchain will detect fraudulent events.

 

Manipulated Blockchain

Trust is the most important factor in any form of business, and most of the time the businesses we get into involve many intermediates between us and the end customer. It becomes difficult to trust everyone in the system, these intermediates can be banks, governments, insurance companies, etc. based on the nature of business or transaction.

For example, let’s take real estate here in India, when a person buys or transfers property, all the records associated with the deal will be with the local governing body, imagine if any of these records are lost or even manipulated, then how the owner will prove his ownership since there is no safe record, anyone can claim to be the owner, and we come across these incidents where the same property is sold to several people.

Now, what if there is no intermediates or central body to control the information! what if the business can be done between peer to peer with none of these intermediates like the banks, governments, insurance companies, etc.

Blockchain is a technology that helps in the decentralized databases in the form of digital ledgers, that can accommodate any growing number of records that are chained to each other against any forgery or duplicates, and are maintained in records called blocks. It’s connected by a process called hashing, and once entered it can never be changed. The experts say that blockchain is the next big thing after the internet.

 

Bitcoin and Blockchain

These two words are not the same. Blockchain is the technology based on which cryptocurrency called bitcoin is built, and it is the best use case out there to show the success of blockchain. In case Bitcoin fails, it will happen because of its own issues like it’s been used by terror groups, government regulations, etc., and not because of blockchain technology.

Blockchain for application development

Blockchain is not only used for cryptocurrency but to build applications for various businesses. There are several platforms, like Ethereum, Hyperledger, R3 Corda, etc. These platforms use blockchain as their storage and programmable smart contracts to execute their business logic.

Smart contracts

They are coded versions of normal business contracts. They are also called self-executing contracts with programmed terms of the agreement between buyer and seller. Once deployed, they automatically and safely execute agreements. All of these will function under a blockchain and they are very transparent without any room for fraudulent activity.

Difference between public and permission blockchain

Under Bitcoin, anybody can read the chain and anyone can add a new block into the chain by the rules, anyone can buy and sell it, anyone can mine it for reward, etc. Bitcoin is totally decentralized and it comes under the public blockchain.

Under permission blockchain, there are permissions granted to read or access certain records, these can be used based on the nature of businesses or the sensitivity of the data.

Industries that can use Blockchain

Some of the industries that can adapt blockchain in the near future :

  • Payments: I have worked as a freelancer and there were times I had to receive funds from foreign countries and it was a long process. The third-party involvement will make things difficult and eat a certain percentage of my earning. Blockchain can make a huge difference here.
  • Banking: It is believed that blockchain can be used to create secure and convenient alternatives to time-consuming and expensive banking processes, this will help them avoid unnecessary intermediaries.
  • Healthcare: Blockchain will help in the clinical trial of each patient so that it will lead to precision medication and treatment, the commerce between drug manufacturers, wholesalers, retailers, and drug stores will become transparent and unnecessary intermediaries will be eliminated.
  • Logistics: When blockchain is implemented it helps to maintain transparency and data sharing across the supply chain, accurate tracking of orders, fraud detection, etc.

Challenges in implementing blockchain

  • New technology: Since it is a new technology, business owners are reluctant to adapt it to their businesses.
  • Cost: When I speak to blockchain gurus even they are not clear about the cost involved in migrating from the current technology to blockchain.
  • Lack of substantial use cases for various industries.
  • Standard: No clear industry standards defined yet.
  • Regulatory body: When there is a shift in power due to the decentralization of data, there will be a lot of regulatory bodies that will be a stumbling block for the technology.

From our understanding, blockchain is here to stay, as someone said, change is the only constant thing, if we do not change then change will destroy us.

PS: All the above information is Our personal grasp of the topic, if there are any flaws we stand corrected.

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