Modern technology allows people to communicate directly - voice and video calls, emails, pictures and instant messages travel directly from A to B. Maintaining trust between individuals no matter how far apart they are. When it comes to money people have to trust a third party to be able to complete a transaction. Block chaining technology revolutionize the way we interact with each other. With the use of math and cryptography blockchain provides an Open Decentralized Database of every transaction involving value - money, goods, property, work or even votes, creating a record whose authenticity can be verified by the entire community.
Blockchain stores information in batches, called blocks that are linked together in a chronological order to form a chain of blocks, changes made to a piece of information recorded in a particular block are not reflected in that block, instead a new block is created depicting that piece of information is changed along with the timestamp. Blockchaining is based on general financial ledger method, that is a non-destructive way to track data changes over time.
But, unlike the centuries old ledger method where the data or entries are recorded inside a book and then stored in a database file on a system, blockchain is designed to be decentralized and is distributed over a large network of computers. This feature of blockchaining reduces data tampering. Wherein, before a block can be added to the chain:
- It has to be encrypted and respective computer has to share the decryption details to all the other computers over the network. This is called proof-of-work.
- The network then verifies this proof-of-work,
- And if it is correct then the block is added to chain.
The combination of these cryptographic mathematical puzzles and verification by many computers over the network ensures that the data in each bock in the chain can be trusted.
This significant feature allows us to interact with the data in real time directly and that is where this technology challenges the status quo in a radical way by eliminating the intermediaries. Any transaction over the internet involves third party trust organization or intermediaries that keeps the information confidential. These intermediaries build trust between the parties and are helpful for verification. This technique restricts the exposure of information and also regulates the risk involved. But it adds up another constraint, that is of more time and money spent. If this information is stored in a blockchain then anyone with access to the internet can get involved in blockchain base transaction and third-party trust organizations may no longer be necessary which saves a lot of time and money.
Blockchain technology allows us to have a trusted peer-to-peer interaction with our data and can be implemented in many different ways - Some blockchains can be public, where everyone can view and access the information, while some blockchains can be private limiting the access to a particular organization or a group of users. And, there are hybrid blockchains combining public-private blockchains, where some data is accessible to a group of people while some is accessible to all on the network, but only few have exclusive right to update the data in the blockchain.
The future economy is going to witness a global decentralized source of trust which will be the combination of all the factors such as decentralization of data, building trust in the data and allowing us to interact directly with one another and the data. But not everyone is ready to embrace it as it brings with it many complicated policy questions framing the governance, security and economics.
Department of Information Technology
Department of Information Technology