What might be a blockchain? This might be a question passing through every single mind hearing the word Blockchain!
Blockchain is nothing but continuously growing list of records,called blocks which are linked and secured using cryptography.Each block contains the cryptographic hash of the previous block,a timestamp and transaction data.
Timestamping:It is the process of securely keeping track of the creation and modification time of a document. Security here means that noone not even the owner of the document should be able to change it once it has been recorded, provided that the timestamper’s integrity is never compromised.
Blockchain is an open,distributed ledger which can record transactions between two parties in a verifiable and permanent way.For use as a distributed ledger, a blockchain is typically managed by a peer to peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority;they all have copies of the existing authenticated ledger distributed among them.
How do Blockchains work
Whenever a new transaction or an edit to an existing transaction comes in to a blockchain, the nodes in the blockchain will execute the algorithms to evaluate and verify the history of the blockchain block that is proposed. If the majority of the nodes come to an agreement that the history and signature is valid, the new block of transactions is accepted into the ledger and a new block is added to the chain of transactions. If a majority does not admit to the addition or modification of the ledger entry, it is denied and not added to the chain. This distributed consensus model is what allows blockchain to run as a distributed ledger without the need for some central, unifying authority saying what transactions are valid and which ones are not.
Decentralization is a great deal because it implies that there is no single point of failure.An individual cannot take away or alter the history to suit their needs.This flexibility of audit trail where u don’t have to trust anyone is the benefit that everyone that’s playing with this technology is looking for.
With blockchain technology each page in a ledger of transactions forms a block.That block has an impact on the next block through cryptographic hashing.In other words,when a block is formed it creates a unique secure code(Hash code) ,which links into next page or block,creating a chain of blocks ;thus Blockchain!
How can block chains be implemented
The blockchains can be configured to work in a number of ways. Bitcoin is one of the them.Some of the top Indian companies have started exploring options with Blockchain Technology. Infosys, the parent company behind the core-banking solution.
Finacle has created a blockchain-based document tracking system during May 2018. They are in the process of implementing the same across the private bank leaders – ICICI, IndusInd, Kotak Mahindra, SIB, Yes Bank etc.(source:economictimes.indiatimes.com)
TCS on the other hand has started research way back in 2016 on overcoming challenges of block-chain implementation in banking. They have been deploying 100+ projects so far (source:ccn.com)
Not just these two, other companies catering to global customers have invested into Block-Chain solutions in the past year. UST Global, PWC, Deloitte and the list goes on.
What are the benefits of blockchain
- Decentralized ledgers
- Redundancy ensured by multiple hosts verifying the data
- Difficult to tamper data (multiple hosts verifying the data)
- Speeds up transaction – The p2p system also helps settle a transaction quickly as it reduces the overhead we faced having multiple intermediaries and centralized servers.
- Reduced cost – Lesser intermediaries, reduces cost.
- Increased capacity – a lot of peers & nodes combine to provide the service, increasing the network capacity bi-fold than a tradition centralized system.
There is no need of central authority which makes it ideal ledger and settlement solution for joint ventures.To have computers verifying the transactions eliminate the need for other settlement agents providing disinter-mediation in a business arrangement and generally reducing costs while improving the speed at which transactions can be made, verified, settled, and recorded.
The digital signatures makes it easy to avoid fraudulent activities.Thereby the organisational resilience increases in terms of transactions value added by trustworthiness, transparency and security.
Thoughts towards Resilience
- Reduces Single Point of Failure (SPOF) – A block-chain distributed ledger (information) has copies across multiple nodes, it works on peer-to-peer (p2p) model. One peer / system going done will not take the entire system down. Thereby increasing redundancy, fault tolerance.
- Eliminate 3rd party Risks – Multiple nodes serving from multiple locations, also eliminate the need for 3rd party intermediaries in most cases.
- Immutable / Tamper proof transactions – The transactions in a block-chain system are recorded / duplicated across multiple peers with a hash key. It becomes difficult to alter a data in a block-chain, which would mean you will have to alter entire blocks of each peer without disturbing the hash key.
- Redundant Capacity – The block-chain system as it demands multiple nodes & peers, also brings us the advantage of the increased network capacity. Its a combined capacity of all the trusted nodes and peers providing service.