Beginner’s Guide to Understanding Blockchain Technology

Blockchain is one of the fastest adopting technologies globally for its interesting features, such as decentralization, transparency and immutability. But what is blockchain about? Why is there such a great demand for it across startups, banks and governments? Here are all your answers.

What is a blockchain?

Simply put, a blockchain is a digital ledger or tracking sheet that stores the list of transactions across multiple computers on a network. Now you can ask how it is different from the bank’s general ledger or overview? A bank’s ledger is a centralized ledger where the bank keeps track of all your transactions, account balances, etc. Banks can use this data for several different purposes to suit their business needs. However, the general ledger in a blockchain is a decentralized general ledger, which means that no one has control over this data.

How did blockchain come into the picture?

Although the blockchain concept was first introduced as a research project in 1991, it became famous only after Satoshi Nakamoto published Bitcoin ‘whitepaper’ in 2008. And the creation of cryptocurrencies, decentralized finance (DeFi) and smart contracts has skyrocketed as a fundamental pillar in blockchain technology.

How does blockchain work?

Quite simply, a blockchain is a set of blocks that continues to be added to the chain each time a new request is initiated. The block basically consists of three elements: the data, the address of the previous block, also known as ‘hash’, and the current block hash.

Why do we need blockchain?

Here are some of the reasons why blockchain technology has become famous

All transactions made on the blockchain are public because it is an open source code. Anyone can view and verify the authenticity of the transactions to ensure that the integrity of the blockchain is maintained.

Cryptocurrencies based on blockchain technology are not under the control of any government or financial organization. This is meant to give power to the individual who gives authority to the individual who makes transactions.

The transactions performed on the blockchain are registered and cannot be changed. As mentioned earlier, anyone can verify the data at any time. This strengthens the security of online transactions. Any change in the block chain is immediately reflected on each node. In case of error, the following blocks are invalidated.

Cryptocurrencies that use blockchain can be sent worldwide faster and cheaper, unlike traditional banking systems. Blockchain is active around the clock and processes transactions much more efficiently.

Since blockchain does not allow any third party to approve transactions automatically, processing costs are also reduced.

Some of the prominent use cases of blockchain across industries include:

Blockchain can streamline cross-border trade finance agreements so companies can easily trade.

By using blockchain, smart contracts can allow customers and insurance companies to handle claims in a transparent and secure way.

• Supply Chain Management

With its unchanging nature, blockchain is well suited to perform tasks such as real-time tracking of goods as they move and change hands throughout the supply chain.

Patients’ vital information, such as age, gender, and medical history, can be stored on a shared blockchain that can be accessed by physicians around the world without undue privacy concerns, providing better and immediate treatment.

In real estate, blockchain can help to quickly verify the finances of the property and can help reduce fraud through encryption. It can provide better transparency throughout the sales and buying process.

Most governments across India and around the world have already started using blockchain technology in administrative processes such as project management, identity management, taxation and voting.

Real use cases of blockchain

In 2016, the smart Dubai office introduced a blockchain strategy where entrepreneurs and developers will be able to connect with investors and giant companies. The main goal is to implement a blockchain-based system that can make Dubai “the happiest city in the world”. Since then, Dubai has flourished to make the best use of blockchain technology.

• The Government of Maharashtra

In March this year, the state government of Maharashtra began using the Polygon blockchain to issue verifiable caste certificates to residents of the villages of Bhamragad and Etapalli in the Gadchiroli district. Other government agencies are looking at using blockchain technology to make the administration process easier.

• Blockchain for humanitarian aid

In early 2017, the UN World Food Program launched a humanitarian aid mission. The project aims to use blockchain technology and send recipients money, food and all types of transactions registered on a blockchain to ensure greater transparency and security.

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Blockchain is becoming more mainstream these days. This has made it easier for various companies to offer effective security measures and improve the infrastructure to stay alert to cyber attacks. With increasing awareness, more and more industries and governments are likely to adopt this technology in the coming years.

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