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Written by Shahnawaz Aziz
Imagine an economy that consists of a large number of people with no access to the financial system. Especially in the developing nations with a low literacy rate people are not able to open a bank account due to cost and necessary documentation. These disfranchised groups would greatly benefit from a bitcoin wallet and its underlying Blockchain technology.
So what is this technology we hear almost every day about and its penetration in different industries?
What is Blockchain?
Is it a package? Is it a system? Is it a part of the Bitcoin Protocol?
It is all of the above.
The Blockchain Technology is the brainchild of Satoshi Nakamoto, whose vision was to invent a distributed, decentralized ecosystem where anyone can exchange value while at the same time guaranteeing their anonymity. Acknowledgement in advance to the technical professionals whose definition is somewhat similar.
The implications of Blockchain will be explained on the basis of three tracks for all practical purposes.
1. Business Track
IIn the financial world the Blockchain is a distributed public ledger where double book-keeping can be managed and data can be stored in a distributed and decentralized manner. This ledger maintains 24x7, globally hundreds of thousands of transactions by replicating across a number of computers called Nodes.Those “nodes” exist in the form of a peer-to-peer network, instead of a central server and store a mirror image of the ledger to prevent spending the same bitcoin twice. These nodes are growing and evolving and are about 9,469 plus across the world..
2. Technical Track
Blockchain is a technology providing solutions of various complex mathematical problems which were previously not solvable..
The architecture and design blueprint of a Blockchain makes it so secure, as data is not held in one place the potential for hacking is mostly removed.
Blockchain system can be roughly explained as a package with the following criteria:
contains a normal database plus some software that adds new rows
validates such rows conform to pre-agreed rules
listens and broadcasts new rows to its peers across the network
ensures that all peers have the same data in their database
3. Process Track
The embedded Blockchain governance enables the implementation of consensus rules agreed by the Bitcoin core community. This ensures that the miners and validators follow these rules for transactions,block creation and propagation.
Miners are responsible for solving a complex problem. If they solve it they are rewarded 12.5 BTCs. A block is identified by its signature which is a hashrate (a measure of a miners performance and mathematical value represented cryptographic format). This is a calculated rate and should be below a threshold value periodically assigned by the bitcoin network founders.
Large corporations, Fintech companies, banks, and entrepreneurs are beginning to realize the unique value proposition of the Blockchain.
Three important unique points of this technology are
Cryptography and digital signatures are used to prove identity, authenticity and enforce read/write
Public keys ensure that the rightful owner of the bitcoin address receives the funds. The regeneration from private keys is impossible as it would take a trillion years for a supercomputer to crack it
2. Cost, and ease of development, maintenance and usage
It’s all open source
Specifications are available
Complexity resulted due to data writing and decentralisation
3. Data validation
Each node/peer contains the same set of previous transactions. These validators check the transaction data and pass it on with additions to the ledger (block data) ) after ensuring the consensus rules are followed
Fingerprinting transaction data and block data using the content of the preceding transaction and block
The logic of bitcoin is to make it hard to generate a fingerprint that satisfies the rules of the bitcoin blockchain. In other words, a hash rate (a mathematical calculation) is generated by the miner below a threshold number assigned by the network. If the miner can show proof of work for generating this hash then the block is accepted by the rest of the peer-to-peer network
This kind of “Peer-to-Peer” network is extremely difficult to close down as there is no central server that can be controlled - hence its a very robust system.