Blockchain is believed to be a huge movement in the world’s currency and transaction activity. Bubbling with immense potential, blockchain technology is one meant for the future. As per a survey conducted by a consultancy firm PWC back in 2018, India might just lead in blockchain adoption by 2023. Along with rapidly changing digital payments and earnings, it will also deal with some rather prevalent security issues. Let’s understand this better: What is blockchain and how does it work?
What is Blockchain?
As the name suggests, blockchain is a series of blocks that help in processing transactions and storing digital data. Often referred to as ‘distributed ledger’, data on a blockchain is made accessible to few people and everyone involved has a copy of the same. Every single transaction that has taken place in the ledger will be recorded by each user of the blockchain. Hence, every user has to update their transaction details to stay in sync.
To be more certain, a block consists of digital information that is saved in a chain which is the public database.
For example, Steem is a blockchain-based social media platform that rewards its members in Steem dollars or Steem that they can use for transactions. If you are a blogger, you can upload regular blogs on the platform. How do you earn money?
Depending on the number of upvotes you get on your article, you will be awarded Steem dollars in your Steem wallet. This wallet is updated by blockchain technology and there is no scope of making any changes or manipulating your transaction details on it. The wallet is a publicly viewable but can be accessed only by you through a private key.
Yes, this is also an example of cryptocurrency.
Read More: 9 Facts About Cryptocurrency You Must Know
How does Blockchain work?
Imagine a blockchain as a personal diary entry you would make of your expenses. Now, imagine it at a much larger scale with multiple parties involved in your transactions. Every time there is new data, a block with data is added onto the string of blocks. Hence, it is called a blockchain. What qualifies for a block to enter the chain?
Once the transaction has occurred, it should pass verification when the blockchain traces the exact details of your transaction. For example, a Steem dollar transaction made by a Steem user will be verified based on the time of the transaction, the amount spent and the participants that were involved in the transaction.
Once the details have matched, the transaction will be stored in a block with your digital signature. It will join the chain of the many transactions that have happened in the past or are happening simultaneously.
The last step is to give the block a hash. A hash is a unique code that defines your block and also adds it as the most recent block on the chain.
There you go! You can now view your transaction in full detail and so can the rest of the world but with limited access.
Also Read: How Blockchain Will Be Crucial For The Supply Chain Industry And Its Ecosystem
Is Blockchain secure?
Even a social media platform like SteemIt uses the concept of public and private keys which restricts the public’s accessibility to a user’s information.
Blockchain is a secure network for mainly two reasons:
First: When new blocks are created, they are stored in a chronological manner. The newest blocks will always be at the end of the chain making it difficult to change to the subsequent blocks. As mentioned above, each block has a unique hash to it.
To make any changes in the information, the hash would also require to be changed. How does this ensure security? If one hash is changed, all blocks would need to have their hash changes which would be a lot of computational effort.
Second: Another effort taken by the blockchain industry in terms of trusting is computer tests i.e ‘consensus models’. Every computer has to probe that the work has been done by them through a complex mathematical problem. Only when the computer is able to solve this equation, it is possible for it to add a block.
Also Read: Understanding The Blooming Relationship Between Blockchain And Insurance
What problems does it solve?
To not have any information altered and be presented to you in its authentic state is a possibility with blockchain. This would be especially beneficial for business firms since customers can have a record of all the products that have been bought and in what state. The problem of ‘bad product’ being manipulated in records vanishes!
Another industry blockchain that makes it easier is healthcare. The mundane and long process of filling out health forms by patients every time they visit is only doubling the work. With blockchain, it becomes simpler to access past records and find information. This reduces the wait time for patients and there is no double work.
Artists also can benefit heavily from blockchain technology to prove they own a piece of content. With so many channels growing and providing a stage for artists, piracy and copyright issues are on a rise. Intellectual property can be protected with blockchain technology creates a record of this and is enough to prove who owns the piece.
Most industrialists think of blockchain as more than just a transaction-based technology. They think of it as a way of life. For it to catch on with banks and financial institutions, it would take a while. The adoption of this technology and understanding its functioning is already in process. The next step would be the execution of this technology successfully and waiting to realize if it is actually as effective as it is perceived to be.
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