Blockchain is the new buzzword – Everyone’s talking about it. But very few gain the exact lucidity of the concept.
Let’s understand this complicated technology in a simpler format in this blog.
The Internet has reformed our world by decentralizing information and Blockchain is the best example of this reformation. In simpler words, it is an online distributed system which stores information and comprises of various interconnected blocks accessible to everyone in the loop.
In 2009, the world experienced a massive financial crisis that started contracting the trust of common people in banking sectors. This gave rise to the thought of assembling the payment process in a decentralized manner. This was the time when Bitcoin came into the picture. It was the first digital currency used in the system of Blockchain. Blockchain is fundamentally the process used for the transaction of cryptocurrencies.
Before moving ahead, let’s perceive the insights of cryptocurrencies.
Cryptocurrencies are virtual money utilized as a medium of exchange in digital transactions. Bitcoin is the most commonly used cryptocurrency in such transactions. It was initially introduced in the form of a white paper.
Blockchain was a revolution in the world of traditional transactions which was being followed for ages. Undoubtedly, technology has made banking more tranquil but this revolution has made it possible to complete transactions without the involvement of Banks, wallets or any third-party applications.
How does it work?
Unlike the centralized system where a single server handles your ledger; in a decentralized system like Blockchain, its several processers around the world updating your ledger. All these processers known as minors, solve complex mathematical problems to regularly update the ledgers in these blocks. Blockchain is a shared ledger used by multiple consumers.
The central authority contains all information about every block in the chain. It allows new blocks to join and gives access to every new block attaching to the chain. All this happens in a thoroughly organized manner. It maintains an exhaustive record of all transactions right from the first block to the last one.
What are the benefits? Why is it required?
The chief benefits of Blockchain over traditional banking are Transparency – Authentication – Security – Auditing – Maintenance cost
Transparency – Unlike other payment systems, Blockchain gives transparency of every update in the ledger to the users in the loop. Ledger is open to every individual performing these transactions.
Authentication – High-level verification steps are enabled for any user to enter the system.
Security – Blockchain has a system that cannot be modified and even if someone tries tampering that, the alterations can be easily detected and recovered.
Audit – The transparency makes reconciliation very easy as every transaction is validated by the users.
Maintenance cost – Cryptocurrency transaction charges are very minimal when compared with the remittance fee charged by the banks for AMB or any other transactions.
What does Blockchain consist of?
Every Block in the chain consists of three things.
- Data – The vital input.
- Hash – The Fingerprint of the block. Hash is unique for every block and is utilized for the identification process.
- Hash of the previous block – This connects the current block with remaining blocks to establish a chain.
Where is it applied?
The use of Blockchain in banking sectors is mostly for correspondence banking i.e. international transactions where the tracking of money becomes difficult as the transaction happens in varying stages at various banks who maintain their unique process of reconciliation.
One of the biggest misinterpretations is that Blockchain is only confined to banking. Blockchain is a technology capable of doing much more especially like internal loans within peers, distributed asset trading and many similar areas where a chain of stages are included. Government, Healthcare, Education are the few sectors where Blockchain is implemented.
Blockchain has a small downside which happens to be its intricate structure. The decentralization system of Blockchain is not user-friendly due to its complex and technical process which makes it difficult for an end-user to comprehend the methodology.
But nothing is impossible for someone who believes he can. Make it possible by upskilling yourself with the certification course on Blockchain and explain the modern revolution to the world in your own words.
“Blockchain is a revolution which is yet to ice at its best”