Blockchain Technology – Everything you need to

know in layman’s language

clearias.com/blockchain-technology

Blockchain technology has become a regular news item with the emergence
of cryptocurrencies like Bitcoin.

Today, Blockchain technology is disrupting almost all markets, changing the way we do
our day to day business. Yes, blockchain technology is changing our world.

Let’s decode the latest buzz word – The Blockchain Technology – in this post. Thank
you for the excellent feedback on our earlier articles in this series – on Artificial
Intelligence, Internet of Things (IoT), and Automation. Feel free to post your feedback
on this article in the comment section at the post-bottom.

Comparing Blockchain to an Excel Sheet

Imagine a Microsoft Excel Sheet file in your laptop with details of some transactions
you made. You can call it a ledger.

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Now, imagine that your Excel Sheet file is copied to hundreds of your friends’
computers, connected to each other forming a network. The ledger in your laptop has
become a distributed ledger.

Then imagine that this network of computers is designed with a technology to

regularly update this Excel Sheet, whenever you or your friends update the ledger.

You now have a basic understanding of the blockchain!

What is a blockchain?
In simple terms, blockchain is a digital ledger.

Wondering what is a ledger?

Ledger is a book containing accounts to which debits and credits are posted from books
of original entry.

A blockchain is a digitized, decentralized, public ledger. So simple, right?

Defenition of Blockchain

The main chain (black) consists of the longest

series of blocks from the genesis block (green) to
the current block. Orphan blocks (purple) exist
outside of the main chain.

The blockchain is an incorruptible digital ledger of transactions that can be

programmed to record virtually everything of value.

Each list of record in a blockchain is called block.

So a blockchain is a continuously growing list of records called blocks, which are linked
and secured.

Who invented blockchain technology?

Blockchain Technology was invented by Satoshi Nakamoto in 2008 for use in
the cryptocurrency bitcoin, as its public transaction ledger. Satoshi Nakamoto’s aim in
creating the decentralized Bitcoin ledger—the blockchain—was to allow users to control
their own money so that no third party, not even the government, would be able to
access or monitor it.
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The creator of Bitcoin, Satoshi, disappeared back in 2011, leaving behind open source
software that the users of Bitcoin could update and improve.

The invention of the blockchain for bitcoin made it the first digital currency to solve
the double spending problem without the need of a trusted central authority or central
server.

The bitcoin design has been the inspiration for other applications.

Bitcoin Is To Blockchain As Email Was To The Internet

In the 1990s, when the internet technology (TCP/IP or HTTP) was in the native stages,
email was the first major application. Later new applications like web browsers came.
Websites became popular. People started using chat software like Skype. Now if you
look at your mobile, see how many different applications are run using the Internet.

Similarly, when blockchain technology emerged, bitcoin was the first major application
which used it. Other cryptocurrencies followed the trend. Now, blockchain technology is
used in a variety of applications like security, online voting etc.

Internet Technology vs Blockchain Technology

Simply put, the Internet allows computers to exchange information; Blockchain allows
computers to record information.

Both use a lot of computers (nodes).

The Digital Economy, Wikinomics is bold on the subject and reflects about Blockchain
that:

The first generation of the digital revolution brought us the Internet of information.
The second generation — powered by blockchain technology — is bringing us the
Internet of value: a new platform to reshape the world of business and transform the old
order of human affairs for the better.

Blockchain is a vast, global distributed ledger or database running on millions of devices

and open to anyone, where not just information but anything of value — money, but also
titles, deeds, identities, even votes — can be moved, stored and managed securely and
privately. Trust is established through mass collaboration and clever code rather than by
powerful intermediaries like governments and banks.
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Technologies behind blockchain technology!

1. Private Key Cryptography

2. P2P Network (Peer-2-Peer)
3. Program (the blockchain’s protocol)

What is the need of blockchain technology?

The blockchain is a mechanism to bring everyone to the highest degree of
accountability. No more missed transactions, human or machine errors, or an exchange
that was not done with the consent of the parties involved.

The most critical area where Blockchain helps is to guarantee the validity of a
transaction by recording it not only on the main register but a connected distributed
system of registers, all of which are connected through a secure validation mechanism.

Blockchain technology can find applications in the following areas in future:

Smart contracts – Any industry heavily reliant on contracts, such as insurance,

financial institutions, real estate, construction, entertainment, and law, would
benefit from blockchain’s indisputable way to update, manage, track and secure
contracts. Smart contracts, those that are embedded with if/then statements and
be executed without the involvement of an intermediary, also use blockchain
technology.
Supply chain management – Whenever value changes hands or the status of
asset changes, blockchain is ideally suited for managing the process.

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 Asset protection – Whether you’re a musician who wants to ensure you get
royalties when your music gets played or a property owner, blockchain technology
can help you protect your assets by creating an indisputable record of real-time
ownership.
Personal Identification – Governments manage vast amounts of personal data
from birth and death records to marriage certificates, passports and census data.
Blockchain technology offers a streamlined solution for managing all of it securely.
Payment processing – Blockchain has the potential to be highly transformative
to any company that processes payments. It can eliminate the need for
intermediaries that are common in payment processing today.
Crowdfunding – As with traditional crowdfunding, a blockchain powered
crowdfunding campaign seeks to secure investment for a new project from an
interested community. But in this instance, funding is most likely to come in the
form of bitcoin or other cryptocurrencies.

Blockchain technology – opportunities and advantages

The blockchain allows our smart devices to speak to each other better and faster.
Blockchain solves the problem of manipulation. It brings everyone to the highest
degree of accountability.
Online identity and reputation will be decentralized. We will own the data that
belongs to us.
Cryptocurrencies take the power away from governments to control the value of
currencies and hand it to people.
The potential is great for people in the informal economy to exploit the
blockchain’s middleman-free way to exchange asset.

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 Blockchain technology can more equitably address issues related to freedom,
jurisdiction, censorship, and regulation, perhaps in ways that nation-state models
and international diplomacy efforts regarding human rights cannot.
Blockchain-based systems allow for the removal of intermediaries involved in the
record keeping and transfer of assets.
The removal of intermediaries and settlement on distributed ledgers allows for
dramatically increased transaction speeds compared to a wide range of existing
systems.
Data entered on the blockchain is immutable, preventing against fraud through
manipulating transactions and the history of data. Transactions entered on the
blockchain provide a clear trail to the very start of the blockchain allowing any
transaction to be easily investigated and audited.

Blockchain technology – Criticisms and Challenges

Huge power required: Remember all that computing power required to verify
transactions? Those computers need electricity. Bitcoin is a poster child of the
problematic escalation in power demanded from a large blockchain network. That’s not
appealing given today’s concerns about climate change, the availability of power in
developing countries, and reliability of power in developed nations.

Security about the private key: The private key must remain secret at all times
because revealing it to third parties is equivalent to giving them control over the
bitcoins secured by that key. The private key must also be backed up and protected from

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accidental loss, because if it’s lost it cannot be recovered and the funds secured by it are
forever lost, too.

Transaction speed: Transaction speed is also an issue. As we noted above, blocks in a

chain must be verified by the distributed network, and that can take time.

Summary
In scaling society up from tribes and small groups, governments have had to confront
the problem of enabling secure commerce and other interactions among strangers. The
methods now may be very different, but the goal is still the same – a secure way of
transactions.

The complex world of big data and IOT is emerging. Blockchain will be an important
part of our financial and technological digital future.

The ‘blockchain’ technology behind bitcoin could prove to be an ingredient of an entire

new world of technology, as big as the internet itself, a wave of innovation that drives
the middleman out of much commerce and leaves us much more free to exchange goods
and services with people all over the world without going through corporate
intermediaries.

It could radically decentralise society itself, getting rid of the need for banks,
governments, even companies and politicians.

References
Investopedia | FusionTourism | Blockgeeks | Wikipedia | Digitial Trends |
Efuture | Forbes

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