Have you ever wondered if there is any easy way of transferring money and complete transactions¬†
without having to deal with online wallets, banks and third-party applications? Well, its possible¬†
and thanks to the Blockchain technology. There are a bunch of ledgers owned by banks, financial¬†
institutions, regulators, insurance companies, and each of these ledgers have to be reconciled.
because you have to reconcile so many of them and change, it creates time delay and obviously¬†
cost. Money sent by your friend to you from America to India may reach you 7 days later. This is
one of many aspects this blockchain technology tries to figure out. The first blockchain was¬†
conceptualized by a person named Satoshi Nakamoto in the year 2008. Blockchain is regarded as¬†
a revolutionary form of technological innovation that has the capacity to impact the economy of a¬†
It is a digital and distributed ledger of records which can be stored and transferred for a¬†
value at global level in real-time and cost-effective manner. All the letters in the block are crypto¬†
graphed and validated by 64 letters#.
Therefore, the record is immutable. Most of us fails to¬†
understand the meaning of Blockchain technology and cryptocurrency because the structure of this¬†
technology is complex and data available on the internet is difficult to understand. So, lets solve¬†
this misery and understand the working of blockchain technology in the simplest manner possible¬†
on the earth. We shall discuss this in an informal manner and later discuss all the complexities¬†
associated with it.
Understanding Blockchain Technology
Imagine 4 people have gone for a dinner namely Jack, Monty, Smith and Cook.
After the dinner was over, Jack pays the bill and all of them decided to
split the bill amongst each other. Now on next day when Monty sends his
share to jack his online money transaction is sent to Jack without a hitch.
Similarly, Smith and Cook share the money but their transactions don't go
through. Both their transactions had some issues with their respective
banks. That's when Jack and all of them comes to know the many ways of how
the bank transactions could fail. It could be due to technical issues
online, transfer limit exceeded, additional transfer charges, or their accounts
may have been hacked.
To solve this issue the concept of cryptocurrency came into existence. Cryptocurrency are a form¬†
of digital or virtual currency that run on a technology called blockchain and thanks to blockchain¬†
that cryptocurrencies are immune to counterfeiting, don't require a central authority and are¬†
protected by strong and complex encryption algorithms. And in the market of thousand of¬†
cryptocurrencies such as Ethereum, Litecoin, Dogecoin, Ripple XPR, one reigns supreme and i.e.¬†
And now let's get back to our previous example where we had Jack, Monty, Smith and¬†
Cook. Now assume that Monty, Smith and Cook sends 2 Bitcoins each to Jack as a contribution to
their previous night's contribution. Assume that Jack already has 5 bitcoins and rest others have 3
bitcoins each. If Monty sends his 2 bitcoins to Jack, a record is created in the for of a block and¬†
the transaction details between them is permanently inscribed in this block. This record also holds¬†
the number of bitcoins each of the friends own.
So, after Monty's transaction
Jack now has 7 bitcoins, Monty has one. Following this, Smith and Cook sends 2 bitcoins each to
Jack. A new¬†
block is now again created for each of these transactions. These blocks hold the transaction details¬†
as well as how many blocks all 4 of them have in reserve. These blocks are connected to each other¬†
as each block take reference from the previous block for the no. of blocks each friend owns.¬†
These chain of records or blocks is called Ledger
¬Ě and this ledger is shared among all the friends¬†
which acts as a Public Distributed Ledger
¬Ě, this forms the basis of blockchain. Imagine if Monty¬†
has only 1 bitcoin left and he tries to send 2 more bitcoins to jack, the transaction will not go
through. This is for a simple reason; all his friends have copies of each ledger and it is clear that¬†
Monty has only 1 bitcoin left. His friends his flag this transaction as invalid. Moreover, any hacker¬†
will not be able to alter the date in the blockchain because each user has a copy of the ledger and¬†
the date in the blocks are encrypted by complex algorithms. All of this is made possible because¬†
of blockchain technology.
Working Of Blockchain
Blockchain can simple be defined as a collection of records linked with each other, strongly¬†
resistant to alteration and protected using Cryptography.¬†
Now let us understand the transaction between Jack and Monty. Every user in the bitcoin network¬†
has 2 keys, a Public key and a Private key. The Public key is an address that everyone in the address¬†
knows of just like an email address of the user. Whereas private key is the unique address that only¬†
the user has the knowledge of (Something like a password).¬†
First Monty passes the no. of bitcoins he wants to send to Jack. Along with his and Jack's wallet¬†
addressthrough a hashing (#) algorithm. All of this is a part of the transaction details. These details¬†
are encrypted using encryption algorithms using Monty's private key. All this is done to digitally¬†
sign the transaction and to indicate the fact that the transaction came from Monty. It is important to note that this output is now transmitted to the outer world using Jack's public key.
With this the¬† message or the transaction can be decrypted by Jack's private key which only jack has knowledge¬†
of. Different Cryptocurrencies use different hashing algorithms. For example, Bitcoin uses the¬†
SHA256 algorithm, Ethereum uses ETHASH. These types of transaction are taking place across¬†
the world and are added block by block.
The people who validate these blocks are called Miners
¬Ě. For a transaction to be¬†
validate and added to the blockchain, miners need to solve their complex mathematical problem.¬†
The Miner who solves the complex transaction first includes the transaction in the block and is¬†
rewarded 12.5 Bitcoins.
Proof of Work:
The process of solving these complex mathematical problems is
called Proof of Work
The process of adding a block to the blockchain is called mining¬Ě.¬†
And after this process Monty's and Jack's wallet are updated. Whenever any transaction happens
it gets connected to the already existing chain of ledgers. This transaction has rightly been¬†
authenticated by everyone.
Let us now understand how Walmart uses Blockchain technology to provide better services to its
users. Walmart was facing problems in delivering quality products to its customers. They were¬†
facing high return rates and large amounts of refunds due to their product's bad quality. They were¬†
unable to determine the point of failure in their supply chain which started from farm, storage,
transportation, processing and all the way to distribution center.
Then Walmart adopted¬†
Blockchain technology and quality of their products was permanently inscribed in a block. For¬†
example, if the customer receives a damaged product, it could now be identified as to where the¬†
product damaged in the supply chain. Thus, helping Walmart to identify the problem area and¬†
fixing them. And this is just one of several ways where blockchain is used in the world.
How Blockchain Can Transform India
Blockchain Technology is as new as Internet was in the early 90's but it is big. E-commerce, social¬†
network or email uses the internet but blockchain is as parallel and as fundamental as internet. This
technology sounds incredibly simple to understand but at the same time complex in its functioning.¬†
It has the potential to change our lives in next 20 years the same way internet has changed our lives¬†
in the last 20 years.
To inform a country like India, we always look forward to transforming
agriculture. Over 120 million farmers are directly engaged in agriculture. But the no. that kills¬†
everyone of us is that 23 farmers commit suicide every single day because of poverty, no farm¬†
equipment, small land, lack of financing and many more. Now how can farmers be transformed?¬†
Now Blockchain is the ideal technology to create fractional ownership and 10 framers can own¬†
one tractor and all the complications that arise from this technology can largely be taken care of¬†
by this technology. The countries all over the world are trying to digitalize land but if you digitalize
it someone can still go and hack it and change the name. Moreover, if you digitalize it, what you¬†
know is whom it belongs to but you don't know whom it belonged to. So again, blockchain can¬†
come in and solve these problems. In fact, Andhra Pradesh is the first state to take initiative and¬†
Today power is a centralized concept where power in supplied in cities from power plant to multiple users. But it
doesn't make sense in villages because you have to produce¬†power where you need power. So again, if you use blockchain, excess power can be supplied to¬†
deficit power. We can also use cryptocurrency which can actually be used to buy power and people¬†
from cities can donate power. This blockchain technology can make power viable. Healthcare,¬†
education fraud, voting fraud, fraud in chit funds, managing subsidies, loans, Aadhaar can be on¬†
blockchain. If we just elevate ourselves and use this technology which is not just a technology but¬†
a philosophy can do wonders.
Application of Blockchain
Having been discussed the blockchain technology which is an exciting new alternative to¬†
traditional currency, centralized banking, and transaction methods that is not only changing the¬†
way we handle financial transactions, but also alternative uses that will change the world.
certain uses of blockchain in different areas:
- Electronic Voting
- Cloud Storage
- Smart Contracts
- Paying Employees
- Asset Management
- Internet of things
- Smart Appliances
- Personal Identification
Blockchain is arguably the best technology today which is safe and secure, according to Alex¬†
Tapscott, the CEO and founder of Northwest Passage Ventures, a venture capital firm that invests¬†
in blockchain technology companies.
Whenever you want to move anything of any value over any kind of blockchain, the network¬†
(Nodes) must first agree that the transaction is valid which means that nothing can be altered in¬†
the blockchain without meeting the requirements with theprevious block. To hack it, you wouldn't
just have to hack a single network but every single computer o that network which is fighting¬†
against you in doing that.
There is greater amount of transparency form the fact that its transaction¬†
ledger for public addresses is open to viewing. Since this technology is decentralized, it removes¬†
the need for middlemen in many processes for fields such as payments and real estate. Auditing is¬†
very easy in a sense that it is very easy traceable where the goods come from. This helps in¬†
improving security and prevent fraud.
This technology uses P2P network which is integral and¬†
critical part of blockchain technology. peer
¬Ě refers to the computer system within this technology.¬† Blockchain is by far the most trustable and secure network as identity remains confidential. The¬†
world is progressing and blockchain technology is the future now and forever till next big things¬†
comes and replaces blockchain technology which is not possible in near future.