“When I first heard about Bitcoin, I thought it was impossible. How can you have a purely digital currency? Can’t I just copy your hard drive and have your bitcoins? I didn’t understand how that could be done, and then I looked into it and it was brilliant.”– Jeff Garzik (Co-Founder of Bloq Inc, a contributor to Bitcoin Core, a Bitcoin developer)
What is Blockchain?
A blockchain is a centralized distributed database of the public ledger of all the digital transactions done among the bitcoin owners. Every digital transaction in the public ledger authenticated by the concurrence of the generality of the participants in the network or system. In this system, once the information entered it cannot erased. Blockchain holds provable details of every digital transaction ever made. You might have heard people talking about distributed ledgers, i.e. a list of transactions that shared among the number of computers, rather than being stored on a central server.
Bitcoin is the best example that has been intrinsically truss to blockchain system. It is also the most controversial matter since it helps to become a multibillion-dollar global market for anonymous digital transactions without any government hold or presence. In fact, in India, the government has rolled out a letter to banks not to transfer money for bitcoin purchase. Still, it has to tackle with a number of regulations problems including national governmental and financial institutions.
Bitcoin blockchain ecosystem is quite difficult because of its dual focus: that everyone should be able to write on The Bitcoin chain; and the other focus is that there should not be any power or control over the system.
How does blockchain works?
Private vs Public blockchain
There is a huge difference in what type of technology you need, whether to allow them to write your blockchain or vetted participants. In theory, bitcoin allows everyone to write its ledger.
Let us see its description:
Public blockchain: Ledgers can be public in two senses:
1. Anyone can “write” data without permission granted by the other authority.
2. Anyone can “read” data without permission granted by the other authority.
Conventionally, when people talk about public blockchain, they mean, “anyone can write”.
Due to bitcoin designed on basis of “anyone can write” blockchain, where the other participants not vetted and can add to the ledger without any approval, it needs a person who has ways to settle disputes and defensive technique to deal with attacks.
Private Blockchain: Again, participants in “private blockchain network” are known and trusted. For instance a group of companies owned by an umbrella company. Defensive techniques not needed or else they are changed with legal contracts. Therefore, overall, you have to behave well because you have signed some treaty. This changes the technical decisions as to which bricks used to build the solution.
Another way of describing private/public authorized or unauthorized.
Do you know about cryptocurrency mining?
Whenever a digital transaction is made, the transaction needs to be authenticated what are called as miners. Cryptocurrency mining mainly includes figuring out complex math problems to verify the transaction and add it to the ledger (A book containing account records). Every time a new block sanctioned by the miner or hashed, some amount of cryptocurrency rewarded to the miner. This is a type of incentive to the miners so they keep on participating in the blockchain and manage the transaction flow.
Do you know how data commutes?
There are two possible ways for data distribution in a network, the one is peer to peer and another is a client-server. You might have heard about peer-peer network file sharing on uTorrent network where files can shared between the users connected to the network without any server controlling the data.
- Client – Server: Usually, in offices, the data managed on servers, where the employee needs to log in to access the data. Here the server is the king because it stores full data, and the clients trust that the data is definitive. Most of the times the internet is client-server, where the website kept on the server and who so ever access to the server is the client. This is also known as efficient, and a traditional model in computing.
- Peer-Peer: In the peer-peer network model, it is an inter-connected network where each peer has access overall data, and easily can updated which shared around as mentioned it is inter-connected (every device in the network connected to each other). In peer-peer it happens many times, the data gets replicated multiple times; once per machine, which may lead to many problems, so we can say peer-peer is in some ways less efficient than client-server. Nevertheless, each peer is more independent and can keep on accessing to some limit if even though its breaks or losses connectivity to the rest of the network. Peer-peer network are robust, as they do not have any centralized server that can controlled, so the closing of the peer-peer network is difficult.
The problem in peer-peer network mode:
In the peer-peer network model, even though all peers are authorized, agreement problem can be faced, if each peer is updating at variant speed and having bit different standings, how will you find the real standing of the data? In an ‘untrusted’ peer-to-peer network where you cannot necessarily trust any of the peers, how do you ensure that bad peers cannot easily corrupt the system?
The cyber attackers can target any network, which can accessed without permission. Therefore, it needs an authenticated way of making the network trustworthy.
What can and cannot menace cyber attackers do?
A fraudulent miner can:
- Decline to relay valid transactions to other nodes.
- Attempt to create blocks that include or exclude specific transactions of his choosing.
- Attempt to create a ‘long chain’ of blocks that make previously accepted blocks become ‘orphans’ and not part of the main chain.
The attacker cannot
1.Create bitcoins out of thin air.
2. Steal bitcoins from your account.
3. Make payments on your behalf or pretend to be you.
With transactions, the effect a dishonest miner can have is very limited. If the rest of the network is trustworthy, they will reject any invalid transactions request coming from them, and they will hear about valid transactions from other honest nodes, even if they are refusing to pass them on.
With blocks, if the menace attacker has enough block developing power he can easily hold back your passing transactions by rejecting to add it to his blocks. Still, your digital transaction will be unconfirmed transaction because you know other trustworthy nodes, and they will add it in their blocks.
Benefits of Blockchain technology beyond cryptocurrency:
* One of the best and attractive aspects of blockchain technology is “security“. As it has very few percent is off to be hacked chance. Above secured data, blockchain also provides enormous opportunities to companies and industries by potentially eliminating inefficient business process. It would allow businesses to simplify internal processes by decreasing the headcount in back offices, downscaling errors and repetitious confirmation steps, and detention in processing caused by more traditional practices of harmonization of records. For instance, the technology may replace in-efficacious accounting and payment networks in the financial industry.
* Blockchain technology will bring great outcome in cost saving to businesses. A renowned investment banking company recently published a report stating that blockchain technology could potentially save stock markets up to USD 6 billion a year. The blockchain has provided not only companies & stock markets with an immense opportunity to demonstrate the business process, but centralized banks also appear to be exploring the execution of blockchain to develop their own digital currencies.
* Quality assurance: If any issue is found somewhere in the supply chain, blockchain system can lead you to the origin of the issue. This makes work easier for the businesses to investigate and take required steps or actions.
* The growth of the business can bottlenecked due to the time-consuming transactions, especially for that process a torrent of communications on a consistent basis. Agreements can validated automatically, signed and urged through blockchain construct in smart contracts. This evicts the requirements of the mediator and saves time and money of the company.
* It is also beneficial for the healthcare industry as using a digital signature on blockchain-based data that permits only when authorized by multiple people could regulate the presence and manage the privacy of health records. In addition, people under same umbrella industry: like in hospitals doctors, patients, and health insurance companies, could be a participant of the overall blockchain, reducing fraud in healthcare payments.
* Voting: the Voting system is likely to be reformed by blockchain in the African society which one of the vital industries. Blockchain technology can used for voter registration, verification, E-voting process and E-vote counting to assure only legal votes counted without any changes or fraud. Using these technology countries will have free and fair elections. African government should take initiatives to include blockchain technology and develop a susceptible to change. By accepting, this technology there will be no chance of manipulation or fraud in future.
* Telecommunication: A huge part of telecommunication industry works around Know Your Customer, normally knows as KYC. KYC has made a mandatory rule that all the organizations must know their details with their correct matching details in the system. However, the problem with this system is that it is costly and consumes time and it the major responsibility of the organization, especially the telecommunication industry. As we all know when we go to buy a new sim card, the network provider’s duty is to verify the data afresh. This makes the whole process supernumerary. Rather of each service provider conducting its own KYC, it can provide to third party to manage these things and this is the scenario, blockchain technology comes in. Using blockchain a globally centralized system can created where the data’s can saved of the customer transparently and securely on the public ledger that divided among the computers.
Therefore, what happens actually, when a customer buys a sim once the data collected on the first purchase are stored permanently? Therefore, in the case in future he goes to buy another sim card there is no need of re-verifying the details. Therefore, this makes work simpler and timesaving.
* Let see a report in which blockchain would have played a major role in the case of Nirav modi fraud.
If blockchain technology used for transactions and accounting, the fraud at state-owned Punjab National Bank (PNB) could have been prevented or at least detected earlier, said fintech experts. Now, more than ever, is a time when those in power should understand the need to implement blockchain technology in the Indian banking system.
This is because frauds are on the rise, especially in public sector banks. According to a Reserve Bank of India (RBI) report, sourced by Reuters through an RTI, state-run banks have reported as many as 8,670 “loan fraud” cases totaling Rs 61,260 crore over the last five financial years up to March 31, 2017.
Similarly, there are many more advantages of blockchain technology in various industries.
Blockchain technology is shaping the world at large, and whatever industry or sector will embrace it will reap the benefits that come with it.