One of the stumbling roadblocks in the development and propagation of digital currencies is trust. How do we know that the controller of the currency isn’t manipulating it behind the doors. Thus, a system was needed to solve for the age-old paradox “Quis custodiet ipsos custodes” (who watches the watchers).
Explanation
Blockchain is a type of Distributed Ledger Technology (DLT) where encrypted data pertaining to any database (for e.g. a list of names and their phone numbers) is stored across smaller “blocks”. Any change in a single block will reflect across the entire “chain” of blocks and thus making it extremely difficult for it to be hacked, or tampered with internally.
The blocks can hold data for multiple transaction simultaneously making it an extremely efficient and robust way to establish a public ledger system. As crypto currency is in vogue at the moment, it makes a perfect example to understand the application of Blockchain Technology
Cryptocurrency is in form of digital coins that are stored in computerized database. It is created by a process called mining which involves high electricity consumption by a high-end computer processor. It is stored in digital wallet and an electronic signature is added to it whenever it is transferred.
Every transfer of Cryptocurrency is codified in blocks. With every transaction these blocks are linked forming a multi-block system called as blockchain. It is a distributed database where all Cryptocurrency transactions are stored anonymously. Each payment/transaction is broadcasted to a network and is recorded so that one currency cannot be spent twice by same user or multiple users by hacking.
Advantages of Blockchain
- Smoother Cross border transactions
- Easier data maintenance due to storage via electronic ledgers
- Lesser human intervention means lower error rate
- More automation will finally result in higher cost savings in the long run
Thus, DLTs and Blockchain in particular present a highly versatile system finding application in Banking and Financial systems, Logistics, Healthcare and Insurance industries as well and is a technology with a potential to significantly change the internet landscape.
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