Blockchain - An Open and Distributed Ledger

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Have you heard the about the term “Bitcoin”? Yes…I am sure you have! Well...We are going to discuss technology backing it i.e. BLOCKCHAIN

So, in nutshell, If you have been interchangeably using Bitcoin and Blockchain then let me clarify that Bitcoin is NOT EQUAL to Blockchain but one of the use cases.

Woah! Another fancy term….Blockchain! Let's do a shallow dive to understand what really it is. :)

First some history…The blockchain is a brainchild of Satoshi Nakamoto (His identity is not confirmed!) that was used for Bitcoin way back in 2008! In process of developing bitcoin, his/his group's work also paved way for something very revolutionary that is popularly known as BLOCKCHAIN.

As Don and Alex Tapscott (authors of blockchain revolution) put it …

“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”

Let's try to understand the Blockchain in the same traditional old school system way by dissecting the words "Block" and "Chain".

So we have now this BLOCK which is a block of data with a hash and previous block's hash which is getting added to some CHAIN of blocks.

#Data can be anything that has some value. In case of bitcoin, it would be sender info, Reciever info and Amount (that is being transferred) #hash in simple terms can be assumed as an encrypted address of a block.

There are mainly five parts in any process that involves blockchain.

BlockChain Process

Let's try to understand the above diagram,

If you want to do a transaction then it will be broadcasted in peer to peer network. Everyone in the network is communicated about the transaction that is going to take place. Some special nodes in the network also called as "Miners" start to validate the transaction. Once the transaction is verified. It is added to other blocks in a chain style which is open and synchronized with everyone thereby completing the transaction and the amount gets transferred.

The short pictorial diagram from PwC makes it clearer

How Blockchain works?

You might be thinking, what is so special about BLOCKCHAIN. Simply put, It

1. Reduces Cost
2. More secure
3. Accelerate Transactions

Let me give you a couple of examples to illustrate this, 

If you want to transfer money from Country A to your sister in Country B, You need to pay some commission to a third party (like your Bank) and it takes a while to transfer the money. With Blockchain, You do a direct transfer, saving on commission and transfer within seconds giving an immediate sense of security for your hard earned money.

If you buy a house in India, you need a government organisation to stamp and sealed document like sale deed to give you a sense of security. However, for this, you need to pay some money, stand in queue for your chance ranging from hours to specific date. Blockchain being a public ledger, shall save your money, time and provide security.

What insight you can draw from these cases that Blockchain potentially removes the intermediaries and make the process completely transparent between the actual buyer and seller that is secure and faster.

Following are some areas that shall soon see the impact of Blockchain

1. Finance (stock trading etc)
2. Governance
3. File storage
4. Internet of Things
5. Business (AML, KYC, Crowdfunding etc)

And many more….Based on your interest, You may like to google about the impact of Blockchain on specific areas as every area is a case study in itself.

Hope this article gave you a basic understanding of Blockchain. Stay tuned for my next article on Blockchain and IoT!

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