As a kid I was an avid quizzer, for me preparations for the quizzes meant buying latest GK/Quiz books from the market.
Let us comeback to present day, any kid wanting to prepare for a quiz today has all the information at his/her fingertips and need not run to nearest bookshop to get a GK book. This has been enabled by a technological disruption called Internet. In-fact today we live in a world of technological disruptions. People are even now talking about technological singularity.
One such disruption is ‘Blockchain’. Heard about it??
Well this concept is already 9 years old and now has the attention of the tech and business world alike with billions of dollar being invested in various projects/concepts. Now have you heard about Bitcoin? Well some of you must have…
What email is to internet, Bitcoin is to Blockchain.
To the uninitiated, Bitcoin is a cryptocurrency and digital payment system. It is decentralized a digital currency with no central bank or authority governing it. Current value of one bitcoin is INR 211513.
The Invention And Key Information About Blockchain
It was invented by an anonymous programmer/group of programmers called Satoshi Nakamoto in 2008. The core concept or backbone of it is blockchain, which is nothing but a distributed ledger wherein a list of transactions is shared among a number of computers rather than being stored in a central ledger i.e. every node is a server. In-short, there is no central governing authority. The ledger contains an ordered & time stamped sequence of ‘blocks of information’.
Let us move away from Bitcoin (well that’s a story for another time to tell), and move towards understanding blockchain.
Suppose you were to purchase a piece of land from someone and based on the document submitted by the concerned person, you have arranged the money to do the purchase. When you went to registrar’s office you came to know that the land belonged to someone else. How were you being duped?
It happened because you were not aware about the true owner of the land (only the owner or the registrar’s office was aware). You were dependent on the central authority to validate and know the transaction.
Imagine a scenario wherein all citizens had the land ownership details of their town and corresponding transaction history (which gets updated real-time); without the citizen being dependent on centralized information repository to validate. This would reduce the amount of fraud and reduce cost of record keeping/security of the authority. The concept we are talking about is distributed ledger. Information about all transactions is available with everyone in the system. Each transaction or set of transaction are validated and this set of information is called block. Now the block is attached to the previous block and within sometime there would be a chain of blocks with historical trail of all transactions. Tampering with one block will break the whole chain.
Even if someone manages to tamper with one chain, then it will be quickly caught as this chain will not match with the copy of all transactions with all the remaining individuals in the system. Here someone would not succeed by breaking a single server rather has to break all servers (each individual or nodes) in the system. This is a herculean task.
What Is The Use Of Data Privacy In Blockchain?
Security and privacy are taken care by usage of asymmetric cryptography for data protection i.e. it uses both public key (encrypt data) & private key (decrypt data).
For easy understanding of blockchain, let us take a simple example:
1.Let us take example of a group of friends A, B, C, D, E, F & G. Each of them is a node/peer in the blockchain network.
- Nodes/Peers: Each participant in the system is called a peer or node. Based on the type of block chain the node can join voluntarily or can be governed
2. ‘A’ has received Rs 400 from B and wants to transfer Rs 200 to C.
3. ‘A ‘details out the transaction and transmits out the hash output of it to all the peers in the network.
Hash Function: It is used to map data of arbitrary size to data of fixed size. It can take any input i.e. pdf file, a video, email, string etc and converts it to a fixed length output i.e. 160 bit.
Following are the basic features of hash function:
- Collision Resistance: It is computationally infeasible to find two different input messages that will yield the same hash output.
- Onewayness: Its computationally infeasible to reconstruct the original message from its hash output.
- ‘D’ by solving the cryptographic puzzle (proof of work) validates the transactions and adds it as a block.
- Validations: It refers to deciding whether the transaction is valid (meeting the protocol requirement) and can be added to the chain.
- Proof of work: Solving a cryptographic algorithmic puzzle to validate and add a block.
- All other peers verify whether the validations done by ‘D’ is correct and arrive at a consensus of adding the block to the chain.
- As there is no central governing the transactions, a consensus reference or validation reference is defined at the time of creation of blockchain framework. Wherein the rules of a valid transaction is defined. For e.g. in this example, A person wanting to transfer any money should have requisite amount with him/her. He/she should show the trail from where the money was got.
Key Advantages of Blockchain
You must be thinking about it!! Let me make it easier for you by listing some:
- Lowering the transaction fees: The transaction fees are lower as there is no central validating authority.
- Durability: There is no central point of failure as it is a decentralized network.
- User Empowerment: All information & transactions are available with the users.
The concept has intrigued and enthused many. Its journey started from financial domain but now its usage is being explored in many other fields such as logistics, e-governance (voting), asset management (land, art and even diamonds), retail etc.
The potential for this technology is still not fully realized nor conceptualized. It is a disruptive technology which has the potential of replacing institutions. Ever increasing computing power & efficiency will give further impetus to its growth. Any field needing better transparency, security, faster transaction and democratization of information, is a valid case for studying feasibility of blockchain implementation.