Blockchain - New Generation Technology For Businesses And Marketers

The Blockchain is a new generation technology that has taken the world by storm. It is often considered by many to be some form of development in computer technology, but in really, it is advancement in accounting as will be seen now.

Overview and History of Blockchain Technology :-

What then is this Blockchain technology? Why is it taken to be an offshoot of accounting? Look at it this way. Accounting is related to the activity of keeping track of transactions and ownership of value.

Now, ownership is not related to any intrinsic value of an object. Ownership rights to a property may be claimed by putting a flag on a vacant piece of land, but that does not prove anything. Ownership is established when society acknowledges that right. If this does not happen, ownership rights can be taken away very easily.

The present system of establishing ownership is through a web of legal formalities involving digital or physical records such as land titles, receipts or patents. When the transfer of ownership rights take place many intermediaries such as banks and government organisations have to authenticate the transaction.

If two people claim ownership of the same property, a court of law or tribunal has to be approached to sort things out. This system is often not very effective and transparent. Documents have to be protected from outside interference and forgery and taxes and stamp duties need to be paid to make the documents legally binding and enforceable.

This is where Blockchain steps in. Blockchain is a very advanced technology that does away with all intermediaries required in conventional systems for record keeping while greatly simplifying the process. The strength of Blockchain lies in its properties - it is reliable, safe from forging, fast and efficient, transparent and does not require any trust to be established between parties.

Most crucially, it is immutable, that is, once any information or data is locked in, it cannot be changed, making Blockchain entirely safe and secure. Blockchain technology made its debut in 2008 when Satoshi Nakamoto (his true identity is still shrouded in mystery) released a paper Bitcoin: A Peer-to-Peer Electronic Cash System that described“peer-to-peer electronic cash” called the Bitcoin.

Starting from a form of establishing an electronic currency, Blockchain has now become one of the ground-breaking technologies that have impacted almost every industry, from manufacturing to retail, from finance to educational institutions

Is Blockchain Cryptography? :-

Blockchain and Bitcoin

Any discussion on Blockchain inevitably has to start with Bitcoin. Soon after the release of Nakamoto’s whitepaper, Bitcoin was offered in 2009 to the open source community.

Blockchain then became the foundation for Bitcoin as it promoted digital trust by recording important information in a public space without allowing anybody to tamper with the records or remove it. The whole Blockchain system is thus transparent, decentralised and time-stamped.

Even after so many years of the advent of Blockchain technology, many people who believe that Blockchain and Bitcoin are the same even though there is a gulf of difference between the two. Around 2014, people started to realise that there was huge potential in Blockchain.

Being an open-ended decentralised ledger, it can record transaction between two parties permanently without the need for third-party authentication. This creates a fool-proof process and one that dramatically reduces the costs of operations.

When businesses and entrepreneurs began to realise these benefits, there was a massive surge in investments in this technology. Blockchain began to be used in supply chain management, insurance, transportation, healthcare, voting and contract management.

The most significant impact has been on the financial sector with almost 15% of institutions basing transactions on this technology. Even marketers are not left behind. Digital marketing agencies like Blockchain Australia and others from around the world are today offering highly optimised marketing strategies based on this technology.

How Does Blockchain Technology Work? :-

Blockchain technology has taken trust in digital data to new heights since any information written into a Blockchain database is impossible to change or remove. This has never existed before, one reason why Blockchain is called the “fifth evolution” or the trust layer of the Internet.

Blockchain and Bitcoin

The Blockchain structure has three core segments.

• Block - This is a record of all transactions over a given period in a ledger. The period, size and date of the transactions in a block are different from all others in a Blockchain. Not all blocks record movement of crypto-currency. There are a whole lot of other inputs from various fields today. However, all transactions in crypto-currency or tokens are necessarily on Blockchain. For a block, a trade denotes assigning a value to it.
• Chain - A hash links one block to another that is, mathematically “chaining” them together. This is a concept that is exclusive to Blockchain and is what glues the Blockchain together. The hash is created from the data that existed in the previous block and consistently locks blocks in the chain in the specific order that they were created and in time.
• Network - A network is made up of “full nodes” and can be compared to a computer that is securing a network by running an algorithm. Every node is a complete record of all transactions that are made in that Blockchain. These nodes can be found all over the world and are operated by anybody willing to do so. However, running the nodes is a very complicated, expensive and time-consuming affair and hence people do not do it for free. The relevant Blockchain algorithm rewards these people usually through payment in crypto-currencies like Bitcoin.

This is the Blockchain structure in its very basic form.

What is a Block in Blockchain? :-

A Network of Nodes

To be technically accurate, a Blockchain is a database consisting of perpetually growing numbers of chained blocks of information that is secured cryptographically. These are replicated and distributed across an independent network of decentralised nodes.

All this can sound quite confusing and intimidating so here is something simpler on blocks and nodes in Blockchain technology.

In Blockchain terminology, a block is a collection of information and data that has happened simultaneously. For easy understanding, each block can be likened to a spreadsheet. Every single row in the spreadsheet contains information on a transaction, and when the spreadsheet is complete, it gets linked to the previous block in the chain.

The newly added block in the chain is then broadcast to every node in the network. A node, as explained previously is a computer that has been dedicated exclusively to the Blockchain.

Blocks as Public Ledger

The result is, therefore, an almost unlimited number of spreadsheets containing millions of rows of data and information that is replicated and stored in thousands of different nodes.

There is a huge network of publicly owned computers around the world each ensuring that the Blockchain remains safe and tamper-proof. Hence, a Blockchain is a public ledger of all transactions of any document across industries as well as of crypto-currency.

The entire Blockchain is stored in the hard drive in every computer node in the network which can verify all incoming messages independent of the other nodes. This ensures that the entire system of Blockchain is decentralised, eliminating the possibility of one single point of failure.

The Nature of Blockchain :-

Distributed or Decentralised

A Blockchain is a distributed, decentralised public digital ledger that is used to record transactions across large numbers of computers. This ensures that no single entry can be changed or modified retroactively without altering all subsequent blocks or the consensus of the network.

Since the data is stored across its peer-to-peer network without being centralised, all risks related to centralisation is eliminated in Blockchain. There is no central and single point of vulnerability that can be exploited by unscrupulous hackers and computer crackers. Similarly, it does not have one single point of failure.

Apart from the security that can be attributed to the decentralised public ledger network, Blockchain also has additional safety measures like public key cryptography. A public key consisting of a long random string of numbers is an address on the Blockchain.

Value tokens sent across the network belong to specific addresses. A private key, on the other hand, is like a password that an owner uses to access personal digital assets. Because of these safeguards, data stored on Blockchain is considered to be incorruptible.

All nodes have a copy of the Blockchain in the decentralised system and all transactions are validated through mining nodes. These transactions are then added to the block being built and the completed block is broadcast to all other nodes.

Various time-stamping schemes such as proof of work are used to serialise changes. Another consensus method is proof-of-stake.

Distributed Database

Blockchain is based on a distributed database. It is a database where all storage devices are not connected to a typical processor. Data may be stored in many computers installed in one common physical location or distributed over a network of interconnected computers.

In a centralised database, processors are tightly coupled in parallel systems whereas, in a distributed database such as Blockchain, there are loosely coupled sites without any common physical components. Blockchain follows the replication process of distributed databases as distinct from the duplication process. Replication uses specialised software to identify changes in the distributed database.

Once these have been spotted, the replication process ensures that all databases look the same. Depending on the size and number of databases, this process can be very complex and time-consuming apart from requiring massive computer resources.

Duplication, on the other hand, is less complicated as it primarily identifies one database as a master and then duplicates that database.

Advantages of Decentralised Blockchain :-

Blockchain is a comparatively new technology, but it has already made a mark in various fields due to certain inherent advantages of its decentralised nature.

• Prevention of Fraud - Blockchain is an open-sourced public ledger, and since all transactions are recorded on them, it is very easy to spot if frauds are taking place. The integrity of Blockchain systems is maintained and tracked by thousands and thousands of miners who validate all transactions every day round the clock. This makes all transactions, including that of crypto-currencies, entirely invulnerable to fraud.
• Protection From External Interference- Blockchain crypto-currencies are not controlled by any Government or central banks and not subject to any external meddling. When Governments control currencies, the result is often inflation or hyperinflation because of debasing, devaluing or printing huge quantum of currencies. This control is not possible in Blockchain because crypto-currencies are essentially software programs with a finite number of mined coins. Hence, the value of the coins is governed by demand and supply factors only and not hyperinflation.
• Fast Transaction Times - Transaction times of Blockchain based crypto-currencies are completed in minutes as distinct from normal banking channels where a wire transfer can take days. This is true for any transaction done on decentralised Blockchain and is the primary reason why businesses and marketers are increasingly shifting to this platform. Lower transaction times is beneficial for the global economy as decision making can be speeded up, and goods can move around the world faster.
• Enhanced Financial Efficiency - In decentralised Blockchain, there are no intermediaries and all transactions move directly from person to person. Hence, people do not have to be reliant on banks and financial institutions where transactions costs can often be prohibitively high. This aspect of Blockchain is very appealing for those wanting to save money on business dealings.
• Effective Store Value - Bitcoin which runs on decentralised Blockchain technology is often referred to as digital gold because of some common elements with the precious metal. Both have finite amounts and both have to be mined. It thus has great store value and is a reason why the value of Bitcoin today has breached the $10,000 ceiling and still climbing. A significant advantage of Bitcoin over gold is that it can be stored in computers and transacted over the Internet.

Blockchain is the new generation technology of today and is increasingly being used by businesses across various industries.