HOW THE BLOCKCHAIN WORK AND ITS BENEFITS
What comes to mind when we hear the word blockchain? What is it really about and what does one stand to benefit? Although most of us have been hearing the word ‘blockchain’ from conferences, friends, social media and so on and still do not understand what it really means. This article will help you understand what the blockchain means, how it works and it’s benefits. Now, what exactly is the blockchain?
The Blockchain is a growing list of records called blocks that are linked together using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree).
The blockchain is also a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that any involved record cannot be altered retroactively, without the alteration of all subsequent blocks. The blockchain database is managed autonomously using a peer-to-peer network and a distributed time stamping server.
The blockchain technology can be deployed in so many ways. Let take an airline company as an example. When we buy tickets on their app or the web. The credit card company takes a fee for processing the transaction. With blockchain, not only can the airline operator save on credit card processing fees, it can move the entire ticketing process to the blockchain. The two parties in the transaction are the airline company and the passenger. The ticket is a block, which will be added to a ticket blockchain. Just as a monetary transaction on the blockchain is a unique, independently verifiable and unfalsifiable record (like Bitcoin), so can your ticket be. Incidentally, the final ticket blockchain is also a record of all transactions for, say, a certain air route, or even the entire air network, comprising every ticket ever sold, every journey ever taken.
But the main focus here is that: Not only can the blockchain transfer and store money, but it can also replace all processes and business models which rely on charging a small fee for a transaction or any other transaction between two parties.
How Does The Blockchain Work?
Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain.
Information held on a blockchain exists as a shared — and continually reconciled — database. This is a way of using the network that has obvious benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet.
What Are The Benefits Of Blockchain Technology?
The basic benefits of Blockchain technology are decentralization, immutability, security, and transparency.
· The blockchain technology allows for verification without having to be dependent on third-parties.
· The data structure in a blockchain is append-only. So, the data cannot be altered or deleted.
· It uses protected cryptography to secure the data ledgers. Also, the current ledger is dependent on its adjacent completed block to complete the cryptography process.
· All the transactions and data are attached to the block after the process of maximum trust verification. There is a consensus of all the ledger participants on what is to be recorded in the block.
· The transactions are recorded in chronological order. Thus, all the blocks in the blockchain are time stamped.
· The ledger is distributed across every single node in the blockchain who are the participants. So, it is distributed.
· The transactions stored in the blocks are contained in millions of computers participating in the chain. Hence it is decentralized. There is no possibility that the data if lost cannot be recovered.
· The transactions that take place are transparent. The individuals who are provided authority can view the transaction.
· The origin of any ledger can be tracked along the chain to its point of origin.
· Since various consensus protocols are needed to validate the entry, it removes the risk of duplicate entry or fraud.
· With the smart contracts, the businesses can pre-set conditions on the blockchain. The automatic transactions are triggered only when the conditions are met.
· Since all transactions on the blockchain are archived and authorized in a decentralized way the system ensures that data is carried out and processed in a reliable and transparent manner.
· Blockchain offers transparent solutions that allows for streamlining and automating of communication with customers, enabling also higher trust level.
· With the blockchain, transaction cost is reduced because it allows peer-to-peer and business-to-business transactions to be completed without the need for a third party, which is often a bank.
· Blockchain allows the innovation of new business models thereby leading to substantial competitive advantages.
· Blockchain allows peer-to-peer and business-to-business transactions to be completed without the need for a third party, which is often a bank thereby reducing cost.
In conclusion, the blockchain technology in its very nature is a democratized system and has no central authority. Since it is a shared and immutable ledger, the information it carries is open to everyone to see. Hence, anything that is built on the blockchain is by its very nature transparent and everyone involved is accountable for their actions.