What is Blockchain Technology And How It Is Useful For Us

March 18, 2018 Author: munishmishra04_3od47tgp
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Blockchain is being termed as the fifth disruptive innovation in computing. Blockchain technology or the distributed, secure ledger technology has gained much attention in recent years. This article presents blockchain technology literature and its applications. A very significant plus of the blockchain technology is that it solves two of the most dreaded problems of currency based transactions, which have so long necessitated the requirement of a third party to validate the transactions.

Blockchain Overview





Blockchain technology is a sophisticated, interesting, and emerging technology. It provides a reliable way of confirming the party submitting a record to the blockchain, the time and date of its submission, and the contents of the record at the time of submission, eliminating the need for third-party intermediaries in certain situations. However, it is important to consider that blockchain technology does not verify or address the reliability or the accuracy of the contents, and additionally blockchain technology provides no storage for records, but instead the hashes thereof

A blockchain is an electronic ledger of digital records, events, or transactions that are cryptographically hashed, authenticated, and maintained through a “distributed” or “shared” network of participants using a group consensus protocol. Much like a checkbook is a ledger of one’s personal financial transactions, with each entry indicating the details of a particular transaction (withdrawal or deposit, recipient and sender, amount, date, etc.), the blockchain is a complete listing of all transactions, whether financial or otherwise. However, unlike a checkbook, the blockchain is distributed among thousands of computers or “nodes” with a process for validating transactions that utilizes a group consensus protocol. Making an addition to a blockchain ledger requires the approval of the network at large making retrospective changes essentially impossible.

Blockchain technology’s most disruptive aspect is its ability to eliminate the need for third-party intermediaries in some transactions. The technology is, in the words of its creator, a “system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.” Because many industries rely upon guarantors, authenticators, and “trusted third parties” (in fact, they are often industries themselves), blockchain technology is likely to be extremely disruptive.

Blockchain Technology

Significance of Blockchain





A blockchain is essentially a distributed database of records or public ledger of all transactions or digital events that have been executed and shared among participating parties. Each transaction in the public ledger is verified by consensus of a majority of the participants in the system. And, once entered, information can never be erased. The blockchain contains a certain and verifiable record of every single transaction ever made. To use a basic analogy, it is easy to steal a cookie from a cookie jar, kept in a secluded place than stealing the cookie from a cookie jar kept in a market place, being observed by thousands of people.

However, Blockchain technology itself is non-controversial and has worked flawlessly over the years and is being successfully applied to both financial and non-financial world applications. Blockchain, mostly known as the technology running the Bitcoin cryptocurrency, is a public ledger system maintaining the integrity of transaction data. Blockchain technology was first used when the Bitcoin crypto currency was introduced. To this day, Bitcoin is still the most commonly used application using Blockchain technology. Bitcoin is a decentralized digital currency payment system that consists of a public transaction ledger called Blockchain. The essential feature of Bitcoin is the maintainability of the value of the currency without any organization or governmental administration in control. The number of transfers and users in the Bitcoin network is constantly increasing.

Benefits of Blockchains

In situations where trust levels are low, due to differences in operational and regulatory landscapes, such as multi party cross border transactions, the transparency offered by blockchain could help by making the lack of trust less of a hurdle in these interactions.

Efficiency of Blockchains





Blockchain technology could improve efficiency when financial entities are reconciling trades. Typically a bank will nominate one of its systems as the golden source of trade data for any particular security. That golden source could be an in-house built system or an off-the-shelf solution. Reconciling this against an external party (whether that’s the trading counterpart or an industry third party) has drag and inefficiencies due to system incompatibilities and processes. This leads to reconciling using the “best common technology” – typically end-of-day batch files. A blockchain will mean that the agreed trade data is already in-house, removing the need to reconcile externally, as the blockchain has already done that in real time.

Transparency of Blockchains

With trade data published to a common platform, regulators or other interested parties can plug into this and get a real time view of the trades. This gives regulators oversight into one common source, rather than receiving reports in different formats at different times from each institution. The transparency offered by blockchains could help regulators detect systemic risks sooner.

Resilience of Blockchains

Storing data over a large number of nodes benefits the resilience of the data – the larger the number of blockchain participants, the more robust the data, with longer life. In this respect, a blockchain system is similar to a massively replicated database.

Governance and Trust on Blockchains

In a blockchain system, a majority of participants need to agree on data being added before it becomes part of the definitive blockchain. This is very different to central, often secretive ledgers held and controlled centrally. When multiple parties have a say over what data is written, the ability to alter data, or remove dubious data, it creates a more honest system.

Key Applications of Blockchain

  • Capable of transforming
  • Making transaction faster
  • Reducing cost
  • More security
  • Transparency
  • Seamless and simultaneous integration of transaction
  • Settlements and ledger updates directly between multiple parties
  • Creates a secure way to share information
  • Conduct transactions without the need for a single, central party to approve them.
  • Only authorized network members can see details of their transactions, providing confidentiality and privacy.
  • All updates to the shared ledger are validated and recorded on all participants shared ledgers, which drives security and accuracy.
  • All updates to the ledger are unchangeable and auditable. Network members can accurately trace their past activity.

Blockchain Applications

References

[1] Supriya Thakur Aras and Vrushali Kulkarni, “Blockchain and Its Applications – A Detailed Survey”, International Journal of Computer Applications (IJCA), Volume 180 – No.3, December 2017.

[2] James Condos and Willim H. Sorrell, “Blockchain Technology: Opportunities and risks” State of Vermont (2016).

[3] Zibin Zheng, Shaoan Xie, Hongning Dai, Xiangping Chen and Huaimin Wang, “An Overview of Blockchain Technology: Architecture, Consensus, and Future Trends”, 2017 IEEE 6th International Congress on Big Data, IEEE, 2017.

[4] Michael Crosby and Nachiappan, “BlockChain Technology beyond Bitcoin”, Sutardja Center for Entrepreneurship & Technology Technical Report, October 16, 2015

[5] Antony Lewis and Mikkel Larsen, “Understanding Blockchain Technology and What It Means for Your Business”, DBS Innovation Group, DBS Group Research, February 2016

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