The Blockchain explained

Imagine a scenario where you have deposited hard earnings of your life in a bank and the bank loses the track of your money, by any means possible, what would be your reaction? You’ll file a police complaint of course, but one thing that you probably won’t remember is that at the time of opening account in that bank you have signed at multiple places and one of those places states that “the bank will not be held responsible for the loss of customer’s deposits for the reasons beyond the control of the bank”.

Now what? Of course some of you will refer to the account insurance money, but let me remind you that in most of the banks the insurance is for ‘accidental cases’ only which means, you’ll get your money once you are dead. Sounds funny ha.

What if there exists a system where you don’t need any intermediate authority to handle your money. Of course the system exists, the ‘blockchain system’.

A blockchain is a list of records, called blocks, which are linked using cryptography. It is designed in such a way that its data cannot be modified

Every record, or block, contains the following:

• Cryptographic Hash – A link to previous block.

• Timestamp – To record the creation and modification time of block

• Transaction data – The most important part of the block, the data itself

The blockchain stores data across its peer-to-peer network, hence eliminates a number of risks that come with data being held centrally. The invention of the blockchain for bitcoin made it the first digital currency without the need of a trusted authority or central server. Despite being primarily used as a distributed ledger for crypto currencies, the blockchain technology can be utilized in the following areas –

1. Smart Contacts – Blockchain-based smart contracts are proposed contracts that could be partially or fully executed or enforced without human interaction.
2. Financial Services – Major portions of the financial industry are implementing distributed ledgers for use in banking. Banks such as UBS are opening new research labs dedicated to blockchain technology in order to explore how blockchain can be used in financial services to increase efficiency and reduce costs
3. Video Games – A blockchain game CryptoKitties, launched in November 2017. The game made headlines in December 2017 when a cryptokitty character, a virtual pet, was sold for more than US$100,000.
4. Supply Chain – Walmart and IBM are running a trial to use a blockchain-backed system for supply chain monitoring — all nodes of the blockchain are administered by Walmart and are located on the IBM cloud.

With so many benefits of blockchain technology there exists some drawbacks also, like –

1. Extremely Volatile – The virtual currencies that are based on blockchain technology are highly volatile. One good example for that is the fluctuating prices of Bitcoin that vary from day to day
2. Crime – Because of the anonymity that exists in decentralized blockchain and virtual currencies which rely on them, they have become a second home for all illicit transactions
3. The 51% attack – 51% attack refers to an attack on a blockchain – usually bitcoin’s, for which such an attack is still hypothetical – by a group of miners controlling more than 50% of the network’s mining hashrate, or computing power. The attackers would be able to prevent new transactions from gaining confirmations, allowing them to halt payments between some or all users. They would also be able to reverse transactions that were completed while they were in control of the network, meaning they could double-spend coins.

What are your views on the blockchain technology? Let us know in the comments 🙂