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Understanding Blockchain Technology

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Understanding Blockchain Technology

Ever since the inception of the information era, we notice cutting edge innovations through all sectors aimed at making our day to day life easier, wherein money transactions play a major role. Although, there are numerous software applications and internet services which make online transactions easier throughout the globe, we notice that moving our financial assets from one place to another goes through a time consuming unreliable process as it uses antiquated systems which are expensive and could endanger our assets. To solve this issue, Blockchain was introduced to restructure business transactions and to introduce better, faster and reliable forms which can be accessed and moderated digitally.

“Blockchain was born to provide legitimacy to its Bitcoin master after the financial cataclysm of 2008. At its heart is a rebellious disdain for central authoritative control, offering instead a decentralized network of self-compliance and regulation. But the servant has become the master, offering business benefits not envisaged during its conception. In fact, it’s nothing short of a game changer for those who can master it.” – Steve Treagust, Global Industry Director for Finance, HCM & Strategy.

What is a blockchain?

“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.” Don & Alex Tapscott, authors Blockchain Revolution (2016).

Bitcoin and Blockchain:

Bitcoin also known as ‘Virtual Gold’ or ‘Cryptocurrency’, is the first decentralized form of virtual currency system that allows online money trading without any bank or a single administration. All these transactions are registered in a ledger that is publicly available, to ensure security and authenticity. The technology that keeps this process functioning without any requirement of an intermediate is the blockchain. Although, these two words been used in the same context and are connected, they refer to two completely different things.

How does a blockchain work?

Any Bitcoin trade happening between two parties is registered in a ‘Block’ comprising details like the source, destination, time and date. A single block registers similar transactions for a span of ten minutes depending on the specific blockchain and its configuration. These blocks combined form a Blockchain which is a data structure used to curate and share a ledger of all the transactions digitally. The technology facilitates fast, secure and transparent peer-to-peer transfer of financial assets allowing users to immediately make and validate the transactions virtually.

“As revolutionary as it sounds, Blockchain truly is a mechanism to bring everyone to the highest degree of accountability. No more missed transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved. Above anything else, the most critical area where Blockchain helps is to guarantee the validity of a transaction by recording it not only on a main register but a connected distributed system of registers, all of which are connected through a secure validation mechanism.”

– Ian Khan, TEDx Speaker | Author | Technology Futurist

Public and Private Blockchain

Public Blockchain

A completely decentralized platform where anyone can create and verify transactions. Using Crypto-economic (A combination of economic incentives and cryptographic verification), only the valid transactions are later register in the ledger.

Private Blockchain

A private blockchain however, is centralized to one organization. The system controls access and permissions and only the central authority has the right to modify. Such a system will ensure an increase in validation efficiency and reduction in the transactional cost.

Benefits of Blockchain

Understanding and utilizing the blockchain technology efficiently has proven to be very advantageous. Listed below, are the most prominent benefits of the Blockchain as per Steve Treagust.

  • Transparent
  • Commercial transparency can sometimes lead to delays in business transactions and might cause a breakdown in relations. Blockchain provides every detail related to the transaction unlike any other platform, to build trust in the process leading to a stable relationship based on transparency.

  • Secure
  • Every transaction made is verified within the network using complex cryptography. The security system used by the Blockchain can assure the authenticity of the information ensuring secure transactions without any form of disruptions.

  • Efficient
  • Transactions between two parties are fast and completed without any intermediary interventions. Also, each transaction is stored in the form of digitalized information which makes sending and moderating easy and quick. The added ability of being able to operate on ‘smart contracts’ which automatically triggers commercial actions based on the contract laid out, streamlines processes and results in saving times and cost from transacting.

  • Auditing
  • As every transaction is recorded and verified, it provides an enduring audit trail for the life of an asset between parties. This plays a vital role in verifying the authenticity of assets.

  • Tracing
  • Being able to track assets or goods on the move is crucial in supply chain management. Access to information related to the current location of the goods and other components can help in taking action to process the transaction faster and without complications.

  • Feedback
  • Having access to the transaction details and being able to trace the assets throughout its lifetime could help when circumstances demand information exchange between the two parties amid or after the transaction. This facility helps in maintaining an asset and giving suggestions post a transaction and for further deals.

Industries using Blockchain Technology:

Although, blockchain technology dominates the finance and banking sectors catering to organisations like Deutsche Bank, US Federal Reserve, Barclays Bank, Citigroup and NASDAQ, it is can be used in many other sectors involving virtual transaction. In the digital era, where our basic necessities are taken care of virtually; Blockchain Technology can change many markets due to its efficient, transparent and cost effective quality. Few of the key sectors it could make an impact on are Healthcare – Electronic medical records, Entertainment – gaming and music streaming, Manufacturing – Supply chain management), Commodities – Diamond, gold, silver & metals, Data Management, Cannabis, Digital Content, Network Infrastructure and Market forecasting.

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Understanding Blockchain Technology. (2018, November 15). GradesFixer. Retrieved October 28, 2020, from https://gradesfixer.com/free-essay-examples/understanding-blockchain-technology/
“Understanding Blockchain Technology.” GradesFixer, 15 Nov. 2018, gradesfixer.com/free-essay-examples/understanding-blockchain-technology/
Understanding Blockchain Technology. [online]. Available at: <https://gradesfixer.com/free-essay-examples/understanding-blockchain-technology/> [Accessed 28 Oct. 2020].
Understanding Blockchain Technology [Internet]. GradesFixer. 2018 Nov 15 [cited 2020 Oct 28]. Available from: https://gradesfixer.com/free-essay-examples/understanding-blockchain-technology/
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