If you are interested in finance or technology, you would probably have heard about the emergence of blockchain. Many companies like Microsoft, Amazon, and IBM are developing the block chain technology and it is expected to significantly dominate the cloud computing arena. The most widely use of block chain technology in the space of cryptocurrency like Bitcoin. Let’s understand what Blockchain is all about and how it works.
So what is a Blockchain ?
It is a shared, distributed ledger that facilitates the process of recording transactions and tracking assets in a business network. In simple words, it’s a master document that records every single action related to it.
Imagine, you are a business owner who transacts daily with customers. You will record your transactions for the day in a ledger. However, your customer may record transaction differently in his ledger. This is a recipe for error, fraud and inefficiencies. There could also be a lot of intermediaries in transactions and can cause delays. It is also an expensive process. A blockchain basically makes it better by eliminating the complexity involved.
Traditional document sharing involves sending files to individuals and asking them to revert back. It involves delays and confusion on the versions and edits made especially in the case of a large document. But with Cloud document sharing, you could send a single file that would be edited by multiple users and will have the option to track the edits. A blockchain is something similar.
How is a blockchain created ?
The word “Blockchain” gets its name from the way it stores transaction data – blocks are linked together to form a chain. As each transaction occurs in a business, it’s put into a block. A block contains the details of a particular transaction. Each block contains a hash – a digital fingerprint or unique identifier. Each block is connected to the one before and after it as it occurs. It is added to the next in an Irreversible chain. Finally, all transactions are blocked together.
A network of “nodes” make up the blockchain. A node is a computer connected to the blockchain network using a client. It performs the task of validating and relaying transactions. It also gets a copy of the blockchain, which gets downloaded automatically upon joining the blockchain network. Every node is an “administrator” in the network.
How does Blockchain technology help Businesses?
Bitcoins would be the best example to explain the blockchain technology. Bitcoin was a digital currency launched in 2009 by a mysterious person (or persons) known only by the pseudonym Satoshi Nakamoto. Bitcoin is actually built on the foundation of blockchain, which serves as bitcoin’s shared ledger. To know more about Bitcoin: A Bit of Coins
You must note that Bitcoin and blockchain are not the same. Blockchain provides the means to record and store bitcoin transactions, but blockchain has many uses beyond bitcoin. Bitcoin is only the first use case for blockchain.
For business, blockchain technology benefits them in multiple ways. It helps them reduce time and cost. Settlements happen faster because it doesn’t require verification by a central authority. There is no need of creating duplicate records. Since there are less intermediaries, both time and costs are reduced. The security features also give protection against tampering, fraud, and cybercrime. It enhances trust across a business network. A better name for the technology would be Blockchange – because it changes the way how businesses operate.
We believe that the future of any business transaction would be dominated by blockchain technology. The world has already witnessed Bitcoin and its applications. We expect more industries to adopt this technology. We also have to closely watch the Hyperledger project – an open source blockchain and related technologies project started in 2015 by the Linux Foundation to support and develop technologies based on blockchain distributed ledgers.