The Internet is an enabler of many disrupting technologies – of which the blockchain is currently one of the most exciting.
Simply put, the blockchain can act as a virtual public ledger that records transactions processed and maintained by a network of communicating nodes running cryptocurrency software. It was invented in 2008 as part of Bitcoin by a person with the computer nickname ‘Satoshi Nakamoto’. It was envisioned as a peer-to-peer payment system and digital currency that can be transferred between any two users connected to the Internet, without using any intermediary.
All about Blockchain
Blockchain is a critical part of the bitcoin peer-to-peer payment system. The bitcoin system works using a blockchain ledger to record transactions. Bitcoin is a global cryptocurrency that can be used as a medium of exchange.
The block chain ledger helps to provide transparency for transactions. Although many bitcoin transactions are in some ways anonymous, the block chain ledger can link individuals and companies to bitcoin purchases and ownership by allowing individual parties, called miners, to process payments and verify transactions.
The blockchain is actually a way to structure data, and the foundation of cryptocurrencies like Bitcoin. This coding breakthrough—which consists of concatenated blocks of transactions—allows competitors to share a digital ledger across a network of computers without need for a central authority. No single party has the power to tamper with the records: the math keeps everyone honest. Forty of the world’s top financial firms are experimenting with the tech.
How does blockchain works
Digital records are lumped together into “blocks” then bound together cryptographically and chronologically into a “chain” using complex mathematical algorithms.
This encryption process, known as “hashing” is carried out by lots of different computers. If they all agree on the answer, each block receives a unique digital signature.
Once updated, the ledger cannot be altered or tampered with, only added to, and it is updated for everyone in the network at the same time.
The amazing feature of blockchain
The distributed nature of a blockchain database means that it is harder for hackers to attack it – they would have to get access to every copy of the database simultaneously to be successful.
It also keeps data secure and private because the hash cannot be converted back into the original data – it is a one-way process.
If the original document or transaction were subsequently altered, it would produce a different digital signature, alerting the network to the mismatch.
In theory then, the blockchain method makes fraud and error less likely and easier to spot.
The potential that blockchain provides banks
Banks do very similar things to each other, even though they compete. They basically keep money safe and a big computer keeps track of who has what. But getting these computers to talk to each other is remarkably complex and expensive – the technology is getting a little old.
If banks started sharing data using a tailor-made version of blockchain it could remove the need for middlemen, a lot of manual processing, and speed up transactions,.
Having access to an open, transparent ledger of bank transactions would also be useful for regulators. And it could help governments tackle tax fraud.
If banks and other financial institutions are able to speed up transactions and take costs out of the system, it should mean cheaper, more efficient services for customers . For example, sending money abroad could become almost instantaneous.
Worldwide, the financial services market is the largest sector of industry by market capitalization. If blockchain technology can replace just a fraction of that by enabling peer-to-peer transactions in other sectors then it clearly has the potential to create huge efficiencies. If you are enthusiastic about learning the concept of blockchain technology, please contact Anglo African on 2331636 or via email at firstname.lastname@example.org