Why Blockchain Technology?

Blockchain Technology.

I have been hearing this word for several years but never paid any attention to it. People were saying various things and I would also read several articles and information about Blockchain Technology and cryptocurrencies. It seemed weird and at the same time I was also astonished to witness its popularity. Not a single day passed by, without the news about Bitcoin and Ethereum in the headlines. Every media outlet was upbeat about Blockchain and Bitcoin. As far as Bitcoin was concerned, I took it to be a sort of digital Ponzi scheme or a massive scam that one day would take the world by surprise.

I ignored the subject and never gave much attention to blockchain and cryptocurrencies, until I landed in Lisbon to be with my son. He prefers to call himself as a digital nomad, who is involved in projects related to Innovation and Technology. His works are related to Technology, and mostly involved in Blockchain projects. That’s where my curiosity turned into exploration and gaining more knowledge about Blockchain Technology.

My detailed online studies enlightened me about this and made me believe that this is the technology that is badly needed to transform the world. Blockchain Technology is trustworthy, transparent and decentralised. Here, decentralised meaning, a technology that cannot be controlled by any Central Government or any one Central Body.

During my studies, I came across several comments that the blockchain can be used only for cryptocurrencies and it is only useful for the financial sector. Well it is true. Initially, it was used for the cryptocurrency called Bitcoin. But it can be used for several other purposes in addition to the financial sector.

When it is said that the Blockchain Technology is incorruptible, immutable and distributable, one gets confused and starts doubting about it. Various content is available online that creates multiple questions and confusion in your mind. I suppose, most of it is due to the misrepresentation or misunderstanding about this technology. My understanding is that different people look at it depending upon their perception and use of it as per their requirements.

Well, let me be very clear and I would like to be as simple as possible. I will put it in simple words, what I have understood about the Blockchain Technology. My aim is at the end of this article, whosoever reads this, will be enlightened about the Blockchain Technology, who can use it or understand better the benefits it can provide us and how we can change the world to make it better for everyone.

What is blockchain technology?

Blockchain Technology was described by a group of researchers in 1991. This technology allows the creation of a decentralised public record of digital information. Blockchain is a type of database. The data (block) is stored in a public database (chain) that can consist of any information. It is the first digital technology that offers a way for unsecured parties to refer to a common, indelible (append only) digital record. It seems complicated, and it definitely can be, but its core concept is really quite simple. This technology remained unnoticed for a long time till in the year 2009 an unknown person called Satoshi Nakamoto launched a cryptocurrency named Bitcoin.

In simple words, Blockchain Technology is an online distributed system that can store information. It is based on interconnected blocks that are open for everyone. As its name Blockchain suggests, it is a chain of connected blocks. A chain that can store information and each one of these blocks contains three main features, Data, Hash and Hash of the previous block.

The first one, that is data stores the information about the type of blockchain. The data which is stored inside a block depends on the type of blockchain. Let us say, this blockchain is about cryptocurrencies like Bitcoin. So, it will store the information about the currency transactions, such as sender, receiver and number of bitcoins transferred. It will also timestamp the transaction recording the time and date of execution. The first block is called the Genesis block. Each new block in the chain is linked to the previous block. The technique is intended to timestamp digital documents so that it is not possible to backdate them or temper with. The purpose of blockchain is to solve the double records problem without the needs of a central server.

The second feature is the hash of that block. It is similar to a fingerprint and it is always unique. It is used to identify that block and all of its contents. Once a block is created, any change inside the block will cause the hash to change. Hence, the hash is very important to detect any changes to the intersections. If the hashtag changes, it does not remain the same block.

The third and the last one that every block contains is the hash of the previous block which connects the current block with the remaining blockchain. This is the most important property of this technology, that makes it so secure. The figure below gives the demo of how the link of blocks work.

Let us say we have three blocks…BLOCK 1, BLOCK 2, BLOCK 3.

Block 1 Hash is 2AB1.

There is no predecessor for Block 1 (Genesis Block) so the previous Hash is 0000

Block 2 Hash is 1BA2

The previous Hash is 2AB1

Block 3 Hash is 3BA2

The previous hash is 1BA2

If you note, all the blocks are containing hashes of previous blocks.

The blockchain Technology is used to secure transfer of items like money, property, contracts etc without requiring a third party intermediary like a bank or Government. Once the data is recorded inside a blockchain, it is very difficult to change it.

Peer to Peer Network.

There is also another feature of this technology that makes it more unique and secure, that is its peer to peer nature of work.

Instead of using a central authority to manage the chain, blockchain allows everybody to join in the chain. And whoever is allowed to join the chain gets the information about every other block. Everyone will have a copy of the blockchain. Using that mechanism

We can actually identify and prove that everything in the blockchain is in order and nothing got cheated or omitted or changed and that’s the property of this technology that makes it so special, unique and trustworthy. Each computer is called a node.

Blockchain Transaction Validation Process.

Whenever a new block is created, the validation process takes place This new block is transmitted to all the users on the network. Now, each node needs to verify the block to make sure that it hasn’t been altered. After complete checking, each node adds this block to their blockchain.

Transaction Request:

Request is placed for the transaction. It could be buying or selling any crypto currency, real estate contract or any other information.

Broadcast the Transaction:

The request is broadcasted and copied to all Peer to Peer networks with the help of nodes (computers).

Validate the transaction:

The nodes in the network validates the transaction and the user with the help of known algorithms.

Add to the Blockchain:

When the transaction is complete, the new block is then added to the existing blockchain.

Why do we need this Technology?

Banking Sector.

There are several reasons why we need this technology. Let’s start from Banking. All over the world we use banks as a mediatery to perform any financial transaction. If I want to send a transfer to pay the tuition fees of my daughter in the USA, I have to approach my bank, and at a prevailing rate of exchange, I have to instruct the bank to transfer a certain amount to my daughter’s account. The Bank charges me a hefty sum as a service charge for the transaction. Moreover, it takes almost three to four days to receive the funds in my daughter’s account in the USA. Whereas, if I do the transaction in the cryptocurrency, the money is transferred to my daughter’s wallet in the required currency in real time, and that too with a fraction of service charge. I dont have to approach any Bank as a mediator. The transaction is between the two of us. The sender and the Receiver. The transaction is recorded on the public ledger with the timestamp, that is available to everyone on the link via several nodes.

This technology will eliminate the duplication and falsification of records and documents. There is proof of stake involved in the process. Hence, this technology is ideal for the banking system for countries like India. The country had witnessed several financial scams in collusion with the bank officials, duping the innocent depositors with their hard earned money. Blockchain Technology, with their peer to peer network validation, can avoid these types of scams.

Election — Votes Counting.

The USA and India are the largest democracies in the world. After every four years there are elections in the USA and in India they are held after every five years. We have recently witnessed the chaos turned at the time of declaration of final results. Both the leaders claimed victory thereby seeking vote counting and recounting. In several states, vote recounting was ordered. It took several days to reach the conclusion and declare the victorious leader.

In all this whole process, the funniest part was the counting and recounting undertaken at the same venues and under the same governance. Why would you in the first place trust the recounting, if at all the initial counting was not trusted? It is one and all the same. It is the same system. Chances of manipulation will always prevail and doubts of the results will always be raised under these types of circumstances. Whereas, if they make the use of Blockchain Technology, all the above confusion and mistrust about the voting and counting can be avoided. There will be no chances of human error or any central authority for its maneuvering. The Peer to Peer nodes will take care of it.

Real Estate — Buy and Sell the properties.

Real Estate investment is another sector, where we can predominantly make use of this Blockchain Technology. Presently, we make all the property deals involving several mediatories. We approach several bodies for the verification of documents. We involve Government departments, financial institutions and legal advisors for the legal matters as well as authentication of ownership. It takes several days and amounts to close a single deal.

Whereas, if we implement Blockchain Technology in real estate we can see the best results. We will save a lot of time and money. Most important is there is no chance of fraud. The database will contain all the details of the landlord, ownership authentication, the year of original purchase, who and when was the property originally constructed, what type of material was utilised. When was it renovated and who is the present owner and what was the amount paid in taxes for the previous years. All the information will be available there that can be downloaded. This is genuine and authentic information as it is updated after reaching the consensus of several nods on the chain.

Here is an excellent example, how Blockchain Technology can be inplemented in real estate by innovative concepts. RealT.co is the Real Estate Company that has implemented this technology and the investors from around the world can invest in the properties, those are generating monthly rental incomes.

Conclusion.

Blockchain Technology can be applied to almost all the sectors that you think of. The initial version of Blockchain Technology was implemented in the financial viz cryptocurrencies, the improvements and later versions have been used in Smart Contracts. These smart contracts could be termed as “live” -encrypted instructions to execute the functions based on meeting certain criterias in the algorithm. However, a lot of research is required. There are various groups and believers that are convinced about Bitcoin as that of a balloon filled with the halogen air that goes higher and higher that may burst once it’s too hot!

There is a reason for that as well. Like mushrooms grown in the boxes, there are several new crypto currencies introduced in the market. Some even with funny names as well as some named after their pets. These currencies are traded only by the speculators and the market punters. No one can buy or trade them for your daily required services. They rarely contain any underlying asset value. Their purpose is speculative trading. Unless and until there are regulatory restrictions and bases imposed upon, there will be several of these types of fly by night operators or space currencies will erupt and continue to confuse conservative mindset.

Raticanta Mandrencar.