Blockchain, in simple terms, is a distributed ledger. The information on the ledger is same across all the computers to validate its authenticity. A blockchain network is entirely peer-to-peer connecting multiple nodes. Each node runs the blockchain software with all the necessary details. Each node individually verifies These details and have to be true on all nodes for it to be a valid entry. A change in an entry has to be done in every single node for it to be true, making it impossible to make fraudulent entries.
Authentication of nodes is done using a private key which is locked down using cryptography. Users are recognised in the network with their private key to connect to the network which removes the need to give out any personal details like email or name. The private key which is available only to you is combined with the public key which is available on the network to make your unique digital signature and authenticate yourself on the network. The bitcoin network is wholly automated without having to rely on a central authority which uses cryptography for its control and management.
Blockchain just makes use of a concept called triple-entry accounting. Thousands of years ago, we were just wanderers and civilisation occurred when we started trading. But trading was done within cities and small spaces which allowed a single entry on what was being traded and who owes how much. The whole country depended on the single ledger. So even small errors can be devastating. A loan can be written off by not entering it on the ledger, or a trade never happened if a page in the ledger goes missing.
A few years later when trading became large scale between kingdoms worldwide, a better system was needed. This is where double-entry accounting came in. When a trade is done between two parties, both of them maintain a ledger. A credit in one ledger and a debit in the other is required to validate a transaction.
The modern, double-entry system for accounting has also some discrepancies in it which can be taken advantage of by users to manipulate the books. But in the blockchain, every transaction is reported as an event in the ledger of both the parties involved and a third new ledger. And, once the transaction has been validated on the blockchain network, it cannot be erased or modified which makes it a transparent and a fool-proof system for maintaining the records.
Why use a Blockchain?
The blockchain is a foolproof way of storing and verifying important data. It cannot be manipulated or destroyed. To change data, it has to be changed all across the network which is impossible for fraudulent entries. Existing services from Governments to Banking industries can make use of the Blockchain technology.
- Malta’s government is putting its academic certificates on the Blockchain. This way, there is a foolproof way for employers to verify the authenticity of a potential employee’s educational qualifications.
- A freelancer marketplace uses Ethereum blockchain to run a freelance marketplace. The rating and history an employer or an employee has is on the blockchain and cannot be manipulated with. You can work anonymously and get paid in Ether once the work is done.
- Automatically measure the performance of an employee and pay accordingly in a fair and transparent manner.
- India suffers multiple fraudulent land registrations, and Andhra Pradesh Government has partnered with a Swedish Blockchain Firm ChromaWay to use Blockchain in Land registrations. This way, the information on who owns a particular property cannot be manipulated with, and fake sales will be hard to close.
- There is so much that can be done with Blockchains that we’ve barely scratched the surface.
- Voting on the Blockchain. Countries can issue unique cryptographic keys, and citizen can use them to securely cast votes from the comfort of their homes which will remove the possibility of voter fraud and make the whole process of voting extremely transparent.
- Banks implementing Blockchain for internal transactions so that there is a detailed record of the money trail.
- International payments between banks which usually takes days can be done in a few minutes by securely verifying the transaction on the blockchain.
- IOT devices on the blockchain which can only be controlled by those who own the keys and cannot be hacked.