The accountant for all forms of cryptocurrency is none other than the Blockchain. The Blockchain technology is the digital, decentralized ledger of all transactions of cryptocurrency. Recently,
…IBM and a network of banks have begun using digital currency and blockchain software to move money across borders throughout the South Pacific… – Fortune
…Credit Suisse’s global head of software investment banking. With blockchain technology, he said, that could take only a matter of minutes… – CNBC
That made us realize how this much unknown digital currency and its related blockchain technology has made its way into our world. In short, blockchain technology is a digital way of storing our day to day transactions made online in more secure and encrypted format.
The data of information is the block, while the chaining such blocks together are blockchain. Slowly the attention has shifted from Bitcoins or other forms of cryptocurrency to the technology underlying it i.e. blockchain technology.
…But blockchain technology has many more potential use cases and applications other than just serving as the fuel behind Bitcoin… – BusinessInsider
Worldwide it has got acclaims and initiative have been taken to put to use this form of digital data recording in our day to day applications on the internet. With the paradigm shift from manual to digitalization of every single form of transaction, be it shopping online or making payments, government worldwide are recognizing the blockchain technology as a prospect.
Blockchain Technology – How it works:
With the beginning of Cryptocurrency, emerged the blockchain technology.
Blockchain technology is that of digitally recording of data which cannot be manipulated or corrupted. The scope is not restricted to virtual currency but to virtually everything which has some value. It is a way of transaction verification which happens only with certain rules. When a transaction occurs,
- a blockchain first verifies it then execution and recording of the transaction happen. This verification happens automatically through cryptography signature.
- A block is a current part of the blockchain which records the recent transaction and once it is verified it goes into the blockchain as a permanent database.
Let’s analyze a cryptocurrency, say bitcoin transaction, to understand the working of blockchain technology.
- When one person sends some bitcoin to another, this transaction is recorded as a block and is broadcasted to every party in the network.
- Those in the network who verify the transaction is valid, the block is added to the chain as a record of the transaction and finally money is sent.
Every block has a hash of information of the previous transaction done. It is built from the integration of three different technologies:
- private key cryptography for its verification
- peer-2-peer network for its system of record, and finally
- blockchain protocol for its platform
Since this concept works on the proof-of-work concept, it has attracted banks and stock market to put this technology into use. Not only have financial institutions but also insurance companies, Internet of Things (IoT) devices are planning to adopt this technology where all form of data can be stored in an open electronic ledger. The only conclusion which could be drawn is that we are definitely moving into a virtual world of tomorrow where internet rules.