What is Blockchain technology
The Blockchain technology is a digitized, decentralized, public ledger of all cryptocurrency transactions. It is the continuously growing list of record called blocks, which are linked and secured using cryptography.
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A blockchain is a private online ledger that uses data composition to simplify transaction. Blockchain technology allows users to control the ledger in a secure way without the help of any third party. A bank’s ledger is connected to a centralised network. However, a blockchain is anonymous, protecting the identities of the users. This makes blockchain a more secure way to carry out transactions. The algorithm used in blockchain reduces the dependence on people to verify the transactions.
A bunch of related inputs forms a ‘block’, which is then chained to the next block using a cryptographic signature, thus becoming part of a digital ledger. If the ledger is for restricted viewing, it is called a ‘permissioned’ ledger; if open to all, it is ‘un-permissioned’.
According to Sunny Ray, Co-founder and President of India’s leading bitcoin blockchain company, Unocoin,
“blockchain enable two entities that do not know each other to agree that something is true without the need of a third party. As opposed to writing entries into a single sheet of paper, a blockchain is a distributed database that takes a number of inputs and places them into a block. Each block is then ‘chained’ to the next block using a cryptographic signature. This allows blockchains to be used as a ledger which is accessible by anyone with permission to do so. If everyone in the process is pre-selected, the ledger is termed ‘permissioned’. If the process is open to the whole world, the ledger is called unpermissioned.”
The USP of Blockchain technology is that it allows two parties to execute a transaction without any intermediary. Blockchain allows financial institutions to execute and verify transactions discretely without any human intervention. One of the key applications of blockchain technology is in digital currencies. Bitcoins, which are now accepted as valid currency by the online payment portals like PayPal, are estimated to be in the region of 25 million globally, with 25 Bitcoins being generated every 20 minutes.
“Bitcoin is the first crypto-currency in the market which has proved that money can be transferred without a bank,” says Prateek Bagaria, Member of International Disputes and Innovation Practice groups at Nishith Desai Associates.
Bitcoins are produced through computer systems by people known as miners. The miner aggregates a relevant number of recent transactions into a block, and then works on algorithms to generate an identifier for the block, called a hash. If he succeeds in producing a hash that can fit into the Bitcoin blockchain of past transactions, he is rewarded in Bitcoins, depending on the amount of effort he has put in.
The electronic ledger of transactions is continuously maintained and verified in ‘blocks’ of records. With the help of cryptography, the tamper-proof ledger is shared between parties on computer servers.