BASICS OF BLOCKCHAIN
What is this game-changing technology that has hit the market recently: The revolutionary Blockchain Technology.
Blockchain technology in a nutshell:
A technology to practice transparency in documentation is called Blockchain. It’s a secure, shared digital ledger used to keep record of transactions in a public or private peer-to-peer network. Each transaction is a block and they are linked to each other forming a chain; all the validated blocks are chained from the beginning to the current block, hence the name blockchain. Blocks are secure in means that, members can access blocks only which are relevant to them.
How does it work?
It works on the principle of shared ledger technology. A shared ledger records all transactions across business network, which is shared between the participating members. Participants have an own copy through replication. It is permissioned, so the members see only appropriate transactions via a private password. Thus, permissioned, replicated shared ledger provides consensus, provenance, immutability and finality.
Blockchain technology eliminates the need for middlemen. This technology could be used for smart contracts, also called self-executing contracts or digital contracts. Smart contracts can be used to carry out transparent, conflict-free transactions without the work of middlemen.
Mining is the answer behind what makes blockchain unhackable. Mining controls
1. security and validity of the blockchain network
2. release of new currency into circulation
Why blockchain technology?
It’s a bank’s job to maintain accurate records; to ensure that money isn’t created out of thin air and that no cheating occurs. Blockchains introduce an entirely new way of record keeping, where the entire network verifies transactions and adds them to the public ledger, eliminating an intermediary.
With this technology there is:
1. Trusted record keeping
2. Improved discoverability
3. Reduced cost and complexity
4. Trusted processes without middlemen
Applications of blockchain technology:
1. Bank handling letters of credit which needs to be offered to a wide range of clients have cost and time constraints. Blockchain provides common ledger for the LOCs which allow both the bank and counter-parties to have identical validated record of transaction. This cuts down cost and the time of execution(less than a day).
2. Bank holding a corporate debt would like to carry out transactions quickly and provide an oversight of the transaction to the client, vendor and government. This can be solved by using blockchain that creates a common ledger for recording the corporate debt/bond. This benefits by speeding up payments, eliminating risk and helps the bank spread the cost across each market.
3. Blockchain technology in business-to-business contracts: buyers require efficient way of converting a purchase order into a validated, self-executing contract. The agreements must be visible to the buyer, seller, banks, stakeholders and logistic partners. Blockchain provides smart contracts and makes it available to all parties. This increases efficiency, transparency and trust amongst the parties.
4. Other potential uses include: derivative contracts, collateral management, cross-currency payment, mortgage verification, real estate records, business licences and ownership records etc.
In conclusion, with the key concepts of cryptographic security, decentralized consensus and distributed ledger; introducing blockchain technology can profoundly alter the way we formulate our social, political, economic and scientific activities.