Unless you are living in a place with restricted information, I am sure you must have heard about this new phenomenon called “Blockchain”. Still in India the exposure to this technology is very minimal. I am writing this blog for people who are interested in learning about this new sensation that is attracting attention from all over the world. Before going into the depth of crypto currency markets and into the blockchain technology. It is critical to understand why do we need it when everything is going almost right in our system. Why is everyone calling it revolutionary?
I am sure all of you will agree that since the beginning of human civilization, the most crucial aspects of any kind of business transactions are “Time”, “Transparency”, “Transaction cost” and most importantly “Trust”.
Let’s take an example to understand the flow of value in our system. Suppose you want to transfer money abroad. The underlying process which takes place when you make this request is that you ask your bank to transfer the funds. Banks in turn check your account balance. If you have enough balance it makes entry into the register (Not literally nowadays but digitally) and sends it to the user. User then receives it and converts it into the domestic currency. Sometimes bank does this conversion for you and charges the spread.
Can you see there are more than one fundamental flaws in the above mode of transaction. Such elementary inefficiency is there in every system where ever the intermediary is present. But to understand the inefficiencies in the above example we need the help of 4T’s. Yes, these 4T’s are the first few spaces where this technology is going to make an impact.
- Time: Can we transact value instantly?
- Transparency and security: Is it possible to make a hack proof 100% secure channel of transaction.
- Transaction cost: Will the transaction and conversion cost be the terminologies of the past?
- Trust: Is there a way to maintain a register among our community (shared with everyone anonymously) instead of institutions doing it for us.
Yes, there is. Blockchain is single handedly bringing in the improvement in all the above categories. Each blockchain, like the one that is used by Bitcoin is distributed which means there is no central database. Distributed means not all processing of the transactions is done at a same place. It isn’t under the control of a single or multiple entity thereby increasing the trust and transparency which is dependent on finite parties as in case of centralized and decentralized systems.
The information of all the transaction resides in the network cryptographically and not with any institution like bank, Government, etc. Every 10 mins all transactions that are conducted are verified, cleared and stored in a block that is linked to the preceding block creating a chain of blocks. This procedure permanently time stamps and stores the exchange of value permanently preventing anyone from manipulating the information in the future. Thereby making the system more transparent and secure.
The application of this technology doesn’t stop here. This new digital ledger (Blockchain) has multiple applications in recording virtually anything of value ranging from birth and death certificates, titles of ownership, financial transactions, votes, genesis of food to anything else that can be expressed in a code.