What is Blockchain Technology?

Aug 14, 2018 | 7 months ago | Read Time: 3 minutes | By CA Sandeep Vinod Kanoi

Over the last few years, software and the internet have made the everyday life easier and convenient. Now, you could easily make purchases and trade securities online. However, a financial asset that needs to be transferred has to move through traditional systems comprising of clearinghouses, banks, and the central depositories. Sometimes it would take several days for a stock trade to settle or the funds to reach an account. Not just these systems are slow and expensive but are also insecure. Blockchain Technology tries to solve this issue by restructuring the fundamental business transactions.

As the name implies Blockchain refers to an open infrastructure with the blocks of information which is linked together having references to the previous block. It’s a distributed and decentralized system such as a public ledger which stores the registry of transactions and assets in a P2P (Peer to Peer) network. For every blockchain transaction, people globally maintain a copy of their records. These copies comprise of detail about each transaction which helps to validate the system.

At the core of it, Blockchain forms a shared reality across the non-trusted entities via an unforgeable network. The system is held together with the form of technology called cryptography that is used for ensuring that the data doesn’t get counterfeited.

The blockchain is an extremely fast and secure technology. Instead of copying information, blockchain technology enables the digital information to be distributed. The blockchain is truly a revolutionary development which has created the very backbone of an entirely new form of internet.

What are the advantages of Blockchain technology?

Just as in the early days of the internet, we’re really still learning about possibilities which have been opened to us from Blockchain technology.

One example is the way we work together on the documents. What we’ve been doing before the advent of blockchain is sending documents to someone, asking the counterpart to make changes to it. Then we wait to get the revised work back before seeing the changes and, making the necessary revisions. Two people in two different locations or even on the systems sitting side by side within the same location couldn’t work on the same database at the same time, as the traditional systems lock out the editing until the person on the other side logs out.

Banks also work in the similar fashion. Whenever a request is made for transferring money from one customer to the other customer, they should spend resources and time on coordinating, synchronizing and checking to ensure transaction happens just as it’s supposed to.

Blockchain technology eliminates a huge amount of this rather cumbersome process because it uses a single transaction ledger with a single version of records on a single database that both parties have access to. This, in turn, greatly simplifies the coordination and validation process, saving time, resources and of course, money.

Blockchain and Bitcoin

Developed originally as an accounting method for a virtual currency “Bitcoin”, blockchains use what’s referred to as DLT (Distributed Ledger Technology) – now appear in a range of commercial applications. As of today, Blockchain technology is used primarily for verifying transactions, within the digital currencies though it’s possible for digitizing, coding and inserting practically any kind of document into blockchain.

Finally

It’s evident that the blockchain technology is making progress into various industries. One can argue that most of the people are not ready yet for the decentralized digital ledgers, however, looking at the progress blockchain has made so far, and it won’t be long before the non-adopters start following it.
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