Blockchain is a decentralized, distributed, public ledger system. In order to understand what decentralized means, first we have to know what is centralization.
Any organization of network where a decision regarding the organization is made by a chosen group of people is a centralized system. Currently, we are surrounded by a mass of centralized system which we use regularly- ordering food from some delivery application or booking a cab via the application. For this, we basically are going through a third party- this third party has complete power over rules and regulations of the system.
Now, a decentralized system is the exact opposite of the former. It is when a service is ruled by no single governing system is the internet.
Now, what does distributed mean?
In 2013, yahoo faced a huge data breach, affecting around three billion users. In 2014, eBay faced a cyber attack that compromised a user’s details for around 145 billion profiles. All these attacks were successful as these companies chose to keep all the data in one server, making it easy for a hacker to decrypt.
By distributing everything everywhere a hacker would need to change the data and all the places at once- blockchain is distributed and decentralized, meaning whatever is stored on a blockchain is distributed. Blockchain and itself are owned by no single governing body.
Blockchain is a sort of system which is not owned by anybody and has no single point of functionality, instead, it is distributed in major.
Now coming to the third part of the definition, ‘ledger’. The term ‘ledger’, originates from banking as it was first coined to denote a list or a book containing financial transactions.
Now, referring to blockchain technology, what exactly is ledger? The answer is- all the transactions that are committed on the network. In other words, let’s jump back to the genesis of blockchain technology. Blockchain technology was invented in 2009 and the timing was impeccable as the world was facing the toughest fiscal crisis. A group or person, under the pseudo name, Satoshi Nakamoto introduced to the public-Bitcoin, a digital currency not owned by the government but in essence very much like cash. Therefore, in a sense, it can be spent collectively it is hard to track and it’s easily trusted.
Now the underline tech that powered Bitcoin was Blackgeek. So any transaction that was using Bitcoin instead of currency was registered in the list called ledger. Then this ledger was distributed to all of the members that have agreed to a bit to the network. Everybody would keep track on each other’s transactions and anybody trying to tamper with records would be easily identified to each of the distributed ledgers of the system.
Many people consider blockchain as a technology that powers Bitcoin. While this was its original purpose, blockchain is capable of such much more.
Blockchain is shorthand for a whole suite of distributed ledger technologies, that can be programmed to record and think anything of value-from financial transactions, to medical records to land titles.
Why blockchain technology stands to revolutionize the way we interact with one another?
• 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; that means, a chain of blocks. If one makes a change to the information recorded in a particular block, one does not rewrite it. Instead, the change is stored in a new block showing the ‘x’ changed to ‘y’ at a particular date and time. These happen because blockchain is based on the centuries-old method of the general financial ledger.
• IT CREATES TRUST IN THE DATA:
Before a block can be added to the chain, a few things have to happen. First, a cryptographic puzzle must be solved, thus creating the block. The computer that solves the puzzles shares the solution to all the other computers on the network, known as proof-of-work. The network will then verify the 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.
• BLOCKCHAIN TECHNOLOGY IS SUCH A GAME CHANGER:
When doing business with one another, one does not disclose to the other person the financial or business records. Instead, one relies on trusted intermediaries, like a bank or lawyer, to view the records and keep the information confidential. These intermediaries build trust between the parties and this approach limits exposure and risk and also adds another step to the exchange which means more time and money spent.
As blockchain is a type of technology, and not a single network, it can be implemented in many different ways:
a. Some blockchains can be completely public and open to everyone for view and access.
b. Others can be closed to a select group of authorized users.
c. There are hybrid public-private blockchains too. While private can see all the data, the public can see only selections.
It is the combination of all these factors- decentralized of the data, building trust in the data and slowing one to interact directly with one another and the date-that gives blockchain technology and the potential to underpin many of the ways one interacts with others. But much like the rise of the internet, this technology will bring with it all kinds of complex policy questions around governance, security, international law, and economics.