The blockchain is often used synonymously with bitcoin, however, both mean different things. Bitcoin is a form of crypto-currency and blockchain simply facilitates transactions in bitcoin and other forms of crypto-currency.
Unlike banks that facilitate the transfer of traditional currencies, the Blockchain is a digital log wherein transactions in bitcoin and other forms of crypto-currency are recorded publicly and in chronological order. Blockchain technology is undeniably a genius invention. One of the main advantages of blockchain is that it is transparent.
How blockchain works:
Each time a transaction occurs between two parties, say in bitcoin, it is recorded in what is called a block. The record also includes details of the transaction like the source, destination, date and time of transaction and details of similar transactions made in the past 10 minutes. Intervals may vary depending upon the blockchain’s configuration.
The validity of transactions made in a certain cryptographically protected block is checked by a set of computer present in the required network. These computers are configured to solve complicated mathematical algorithms that occur when the block’s data is worked upon. Once the algorithm is solved the transactions of the block become verified.
Blockchain data structure:
The blockchain is a database in which data is built in successive blocks. Each block includes a small piece of data that checks the content of the previous block. If any attempt is made to change the structure of any of the blocks in the sequence, the entire structure changes.
To put it simply, assume that a database is like a Lego tower and the pieces that make it up follow a particular sequence of pink-blue-blue-green-pink. Suppose the third block is changed to yellow, the entire tower changes color and the sequence becomes pink-green-yellow-red-pink. The system that maintains the blockchain will be able to detect any attempts of modification, thus making it tamper proof.
The relevance of blockchain:
The many benefits of blockchain can help business industries in different ways:
- Quality assurance:
If any glitch is detected anywhere along the sequence of blocks, the origin of the glitch can be traced. This enables businesses to investigate and rectify the issue at the origin itself.
- Error-free accounting:
Recording transactions virtually eliminate the possibility of errors. Also, verifications occur at every level as the records move from one blockchain node to another.
- Fast transactions:
Unlike banks, that operate only on traditional hours and are closed on weekends, blockchains function 24×7. This is a massive improvement over cross-border payments.
Blockchain technology is however not without its flaws. To adopt it, financial institutions would have to adopt new networks and abandon already existing ones. The blockchain is a costly system and is still in its formative years and hasn’t reached full maturity.
In spite of its flaws, one cannot deny that blockchain has completely changed the face of business. Blockchain has a long way ahead of it in order to be accepted in the mainstream, however, its advantages are such that it might soon be adopted by non-users.
Sayani Rakshit is a student of Kamala Nehru College studying Journalism. She started reading at an early age and weaving stories in her mind. She realized she wanted to narrate stories, and writing was the best way to do so. Through her words, she wishes to motivate and inspire people and provide them a sense of belonging.