What is Block Chain.
Block chain is a simple digital platform for Recording and Verifying Transaction so that other user can’t erase them later anyone can see them.Blockchain can be considered a secured business network where participants transfer/exchange assets with decentralized ledger* and each participant will have a copy of its content, in constant sync with other participants.
ledger* = Record or Book contains list of financial accounts of a particular type.
Four important Pillers of the Block Chain Technology
Distributed (shared) Ledger
- Record’s system shared in the whole network.
- Participants contribute to the P2P network continue to work interconnected and independent.
- Secured transactions.
- Participants do have a role, objective defined and Governance of who can see what.
- Because the network is shared with different players, complex privacy criteria are in place to define what information will be shared, with whom, in what moment.
- Authentication can be verified by peers.
- signature to the privacy criteria.
- When a player decides to join the network, one define what are the roles and objectives: deadlines, acceptance of the demand, the value accepted.
- Contract / Business rules incorporated in the transaction’s database and executed with the transaction.
- Code-based financial agreements.
- Static negotiation rules that are defined in a network.
- Eliminate the need of an intermediary regulatory agent validating if the smart contract rules were met by all participants in the distributed ledger.
- In a mathematical algorithm representation, the consensus performs the validation, using various methodologies, to check if the smart contract values are correctly represented and in compliance by those participants.
- Enable reconciliation.
- Any transaction can be performed nearly real time.
- Think on the average three days gap to move currency overseas reduced to few seconds with cryptocurrency.
Enhanced security and transparency.
- Compliance and Fraud proof.
- Sequential ledgers.
- Each transaction in the chain represents all predecessor transactions, it’s cumulative.
- Transactions become immutable, verifiable and auditable.
When exchanges of goods are recorded on a blockchain, you end up with an audit trail that shows where an asset came from and every stop it made on its journey. This historical transaction data can help to verify the authenticity of assets and prevent fraud.
- Dis intermediation.
- The blockchain network removes the middleman and easily scale it.
Applications of Blockchain
- Smart contracts
- The sharing economy
- Supply chain auditing
- File storage
- Prediction markets
- Protection of intellectual property
- Internet of Things (IoT)
- Neighbourhood Microgrids
- Identity management
- AML and KYC
- Data management
- Land title registration
- Stock trading
Issues and Difficulties in Block Chain Technology
Blockchain technology involves an entirely new vocabulary.
This requires a large network of users, however. If a blockchain is not a robust network with a widely distributed grid of nodes, it becomes more difficult to reap the full benefit.
Transaction costs, network speed
Higher costs as Nodes seek higher rewards for completing Transactions in a Supply and Demand scenario
As Nodes priorities Transactions with higher rewards, backlogs of transactions build up
If a blockchain is used as a database, the information going into the database needs to be of high quality. The data stored on a blockchain is not inherently trustworthy, so events need to be recorded accurately in the first place.