Blockchain- Hottest gosip of the town

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 authority or central server. The bitcoin design has been the inspiration for other applications.

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What is Blockchain?

As per Wikipedia, A digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly. Blockchain was invented by Satoshi Nakamoto in 2008 for use in the cryptocurrency bitcoin, as its public transaction ledger. 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 authority or central server. The bitcoin design has been the inspiration for other applications.

Majority of the people think of blockchain as the technology that powers bitcoin. While this was its original purpose, blockchain is capable of so much more which we will be covering in this article.

Despite the sound of the word, there's not just one blockchain. In short, blockchain is a whole suite of distributed ledger technologies that can be programmed to record and track anything of value, from financial transactions to medical records or even land titles.

You might me thinking we already have numerous processes in place to track data.

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Image: Blockchain Workflow

What's so special about blockchain?

Let's break down the reasons why blockchain technology stands to revolutionize the way we interact with each other.

1) The way it tracks and stores data

Blockchain stores information in batches, called blocks, that are linked together in a chronological fashion to form a continuous line: metaphorically, a chain of blocks. If you make a change to the information recorded in a particular block, you don't rewrite it instead the change is stored in a new block showing that 'X' changed to 'Y' at a particular data and time. That's because blockchain is based on the centuries old method of the general financial ledger. It's a non-destructive way to track data changes over time.

For example: Let's say there was a dispute between Lucy and her brother Bob over who owns a piece of land that's been in the family for years. Because blockchain technology uses the ledger method, there is an entry in the ledger showing that Alice first owned the property in 1950. When Alice sold the property to Robert in 1980, a new entry was made in the ledger, and so on. Every change of ownership of this property is represented by a new entry in the ledger, right up until Lucy bought it from their father in 2012. Lucy is the current owner and we can see that history in the ledger.

Now, here's where things get interesting. Unlike the traditional ledger method - originally a book, then a database file stored on a single system. Blockchain was designed to be decentralized and distributed across a large network of computers. This decentralizing of information reduces the ability for data tampering and brings us to the next reason that makes blockchain unique.

2) It creates trust in the data

Before a block can be added to the chain, a few things must happen.

First, a cryptographic puzzle must to be solved, thus creating the block. The computer that solves the puzzle shares the solution to all the other computers on the network. This is called proof-of-work.

The network will then verify this proof-of-work and, if correct, the block will be added to the chain.

The combination of these complex math puzzles and verification by many computers ensures that we can trust each and every block on the chain. Because the network does the trust building for us, we now have the opportunity to interact directly with our data in real-time. And that brings us to the third reason blockchain technology is such a game changer.

3) No more intermediaries

Currently, when doing business with one another, we don't show the other person our financial or business records. Instead, we rely on trusted intermediaries, such as a bank or lawyer, to view our records, and keep that information confidential. These intermediaries build trust between the parties and are able to verify.

For example, "Lucy is the rightful owner of this land".

This approach limits exposure and risk, but also adds another step to the exchange, which means more time and money spent. If Lucy's land title information was stored in a blockchain, she could cut out the middleman, her lawyer, who would ordinarily confirm her information with Bob. As we now know, all blocks added to the chain have been verified to be true and can't be tampered with. So, Lucy can simply show Bob her land title information secured on the blockchain in that way Lucy would save considerable amount of time and money by cutting out the middleman.

This type of trusted peer-to-peer interaction with our data can revolutionize the way we access, verify and transact with one another. And because blockchain is a type of technology, and not a single network, it can be implemented in many different ways.

Some blockchains can be completely public and open to everyone to view and access called as public blockchains.

Others can be closed to a select group of authorized users such as your company, a group of banks or government agencies called as private blockchains.

And there are hybrid public-private blockchains too. In some, those with private access can see all the data, while the public can see only selections. In others, everyone can see all the data, but only some people have access to add new data.

A government, for example, could use a hybrid system to record the boundaries of Lucy's property and the fact that she owns it, while keeping her personal information private. Or it could allow everyone to view property records but reserve to itself the exclusive right to update them.

It is the combination of all these factors decentralizing of the data, building trust in the data and allowing us to interact directly with one another and the data that gives blockchain technology the potential to underpin many of the ways we interact with one another.

But, much like the rise of the internet, this technology will bring with it all kinds of complex policy question around governance, international law, security, and economics.

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