What is Blockchain Technology?
Before we talk about Blockchain it is important to know the role intermediaries play in economy. Intermediaries like banks and government facilitate the transaction of goods and services by creating trust and certainty. Like when an individual or business makes an electronic payment, they require a bank to track and record the transaction or when an individual buys a real state property then they need local government body to keep records stored. What if there was a way of making a transaction that didn’t require the use of trusted intermediaries like banks, government or local body?
Blockchain enables transaction of almost anything available in digital form like digital money, assets or information, etc from one individual to another individual without using any intermediaries.
Blockchain is open and distributed ledger, comprised of unchangeable, digitally recorded data in packages called blocks. These digitally recorded blocks of data are stored in linear chain. Each block in the chain contains data which is cryptographically hashed. The block of hashed data draw upon the previous block in the chain, ensuring all data in the overall Blockchain has not been tampered with and remains unchanged.
It is believed to be useful for any sector that has complex and large scale back office processes that may involve phone calls, emails and paperwork for example banks and remittance business. Similarly the technology can also be used wherever there is a need for reporting, transparency and dissemination of data, say stock exchange and clearing houses.
What is its advantage?
“It can Eliminate middle man” Because it validates transactions and the value of the property being transacted Blockchain can reduce the middle man, be it the art dealer, real estate agent, music agent or estimator. With Blockchain, artists can go straight to the people, rather than through music labels, to protect their own music and royalties.
“No reconciliation required” In current setup, for reconciliation, manual intervention is required which is done through an intermediary. In Blockchain there is no need for reconciliation, which is usually the back office in most businesses. This helps to reduce costs.
“It can Validate and Secure almost anything” The application built on this technology is believed to be difficult to break into. Saket Modi, CEO of Lucideus Tech “When you make any transaction, you have to sign it off using a digital signature which is cryptographically encrypted and is difficult to hack into. As every added block broadcasts the transaction into a public ledger, in case of fraudulent transaction, every node can spot it and deny the proceedings.
How Blockchain works?
In this example we have seen how a monetary transaction took place however in the same ways every agreement, every process, every task and every payment would have a digital record and signature that could be identified, validated, shared and stored without any intermediaries like lawyers, bankers and brokers. Any machines, algorithms, organizations or individuals would freely transact and interact with one another with no or little friction.