Blockchain technology is not yet familiar to most today, yet the potential is enormous, writes Sandeep Suri
Blockchain technology is a hot topic and the subject of numerous studies. Some experts consider it as the next technological revolution after the internet.
There are numerous explanations out there on the topic. The way I see Blockchain is really to think of it as a database. And it’s a database that is shared across several participants. We think about a network of participants, and each has a computer. The idea is, simultaneously, each member of the network holds an identical copy of the blockchain database.
The fundamental principle followed is that the information is potentially available to all participants at the moment in time. It’s a new way of keeping transactions without having a central agency like a bank.
Or simply put, it’s a distributed, decentralised public ledger that is stored in the digital format called ‘block’ and stored in a public database – the ‘chain.’ It is an open ledger that records online financial transactions in chains. Each chain has individual units called ‘Blocks’. Similarly, each block consists of a unique code called ‘hash.’ Every ‘hash’ also contains the hash of the previous block in the chain. In a specific order, the link with each other is to form a blockchain.
The term blockchain is generally associated with cryptocurrency like the Bitcoin and Ethereum; the underlying technology applies to many different domains. At its core, a blockchain is a mechanism for creating a distributed ledger. The word ‘Distributed’ here means that multiple parties can participate, view, and audit the ledger’s data.
With every transaction that is executed through Blockchain, it’s blocked together with all other transactions. To the other end, the transaction needs validation by more than 50% within the Blockchain network. Once the validation process is over, the block is timestamped and linked to the rest of the block. These are then conveyed over the network for verification and validation for ‘mining.’ The records of verified transactions are then transferred and stored in a single block.
Blockchain technology was invented in 2008 but started gaining traction only with Bitcoin’s launch. Blockchain focuses on three significant deliverables: Value – enables an asset to be transferred without a centralised middleman; Trust – creates permanent records of who owns what, secure to preserve the ‘information integrity’ and Reliability – the concept of decentralised network removes the single point of failure.
In essence, Blockchain is a chain of information that leaves a perfect audit history. One can go back through time and see the entire database. If you’re recording things like property titles, insurance, you can see a previous owner of the property/insurance and the current owner. You’ve got this perfect audit trail. But the really exciting thing is the idea of process integrity as the database can only be updated when the correct credentials are applied, and most importantly, those credentials are verified by a majority of participants in the network. It’s like, you have multiple pixels of a photograph lying in different computers, but the picture can only be viewed when the pixels are stitched together! You’re securing this against the idea of a single point of failure and somebody working nefariously to corrupt the database. The beauty is that you have this democratisation of the process of dating the database.
Well, Blockchain is a promising technology that is going beyond cryptocurrency into more mainstream applications in business like Insurance and Real Estate. The technology is still in its infancy stage but will become a mass product gradually as companies better understand how Blockchain can lower the cost of completing secure transactions between their customers and suppliers while reducing their needs on intermediaries. I agree, Blockchain is not so profound today, yet the potential is enormous. It’s a space that needs to be watched closely as we move forward for another transformative technology wave!