Blockchain is a list of blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp and transaction data. By design, a blockchain is inherently resistant to modification of the data. A simple explanation of blockchain should include the fact that it is not just a public ledger, but a real-time public ledger that records practically anything that can be put on record, including contracts, financial transactions, information on supply chain, physical assets, etc. One major idea behind blockchain technology is that there is no one organization or person who is in charge of keeping this ledger.
Instead, the ledger is open for everyone in the chain to see every detail of every record. Each of the records in this chain of records is referred to as a block. It is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. Blockchain helps to achieve decentralized consensus. This makes blockchains potentially suitable for the recording of events, medical records, and other records management activities, such as identity management, transaction processing, documenting provenance, food traceability or voting.Blockchain was invented by Satoshi Nakamoto in 2008 for use in the cryptocurrency bitcoin, as its public transaction ledger.
The invention of the blockchain for bitcoin made it the first digital currency to solve the double spending problem without the need of a trusted authority or central server. The bitcoin design has been the inspiration for other applications.For simple understanding of Blockchain, at first we need to understand that what is ledger. Simply defining in accounting scope, ledger is a computer file or a book where you can find a complete record of a company’s financial transactions throughout its life. Using this record, accounting officers can prepare the company’s financial statements. The ledger record financial information on liabilities, assets, expenses, revenues and owners’ equity. Similarly, Blockchain would be a public or distributed ledger, meaning, the records it contains can be verified autonomously without the need to have a central entity. Accordingly, it is quite easy to discover without anyone else’s involvement, whether any tampering with your copy of the ledger has taken place. This essentially makes blockchain a public ledger that everybody can verify.But, it is not just a public ledger, also a real-time public ledger that records practically anything that can be put on record, including contracts, financial transactions, information on supply chain, physical assets, etc.
Important things to know about blockchain
1. Bitcoin can be said to have pioneered blockchain and has been growing by over 100% every year since its debut as a money exchange system in 2010.
2. 50% of the total world population uses the internet but only 0.5% of the entire human population uses blockchain technology.
3. Blockchain is still in its inception years, like where the web was two decades ago.Blockchains can be private or public (like internet versus intranet.)
4. By 2024, the global market for blockchain is projected to be worth around $20 billion.
5. The transparency nature of blockchains is a major selling point for the technology, given that anyone with a blockchain access can view the chain in its entirety.
6. You can think of the blockchain as a Google document which has been shared with other users, and every change made to the document can be seen by everyone with access to the document in real time. The ledger is always being updated and every participant has his own ledger copy.
7. 90% of people who know how blockchain works and how to use blockchain are in agreement that it definitely will disrupt the workings of the financial and banking industry. According to available estimates, banks could potentially save as much as $12 billion every year by introducing blockchain technology to their operations.
8. Big multinationals are investing heavily into Blockchain technology, with the average investment in projects related to the technology standing at $1 million. IBM alone has employed around 1000 employees to work on blockchain related projects and dedicated $200 million to those endeavors.
9. With the rise of blockchain, some jobs that are today coveted will become obsolete. All the same, the tech will create new careers and job opportunities that don’t exist today.
In the matter of working of the Blockchain, let us think Blockchain as a long chain of records (financial transactions or otherwise) made up of blocks, with each block being each of the records that make up the long chain. Each block is encrypted and has a timestamp. The “owner” of each block is the only one who can edit it. Each owner has a private key which they can use to access their block. With every change that occurs to one block within a Blockchain, the information on the change is distributed in real time to the rest of the blockchain. Whenever there is a new transaction in a blockchain, the first thing that happens is encryption. The transaction is encrypted and then added to a group of new transactions to form a block. This block is broadcast across the entire network of computers within the blockchain. Verification of the transaction takes place within each node, after which a record of the verified group of transactions can be added to everybody’s computer at the bottom of the ledger, further elongating this chain of records.
Potential and modern uses of blockchain technology
1. Payment systems and digital currencies
2. Online privacy
3. Smart contracts: smart contracts blockchain explained