Steps Involved in Blockchain for Development

What is ‘Blockchain’? 

In 2009, an author (or authors) using the pseudonym Satoshi Nakamoto published a paper titled, ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ , which outlined a vision for a new kind of digital currency. According to Nakamoto, commerce between two willing parties on the Internet had come to rely almost exclusively on financial intermediaries – such as banks, credit card companies or third-party payments portals like PayPal – to authenticate and process payments. These intermediaries are necessary because all economic exchanges require trust; at the most basic level, we must have a reasonable expectation that the individuals or institutions with whom we transact will not take advantage of us, regardless of our ability to monitor their actions . Financial intermediaries have built complex systems, processes and databases to help reduce our uncertainty when we buy or sell online, but these add time, cost and inconvenience to our digital transactions without fully eliminating the risk of fraud. To enable this digital currency, Nakamoto argued that a new system was needed where trust was built on the basis that every transaction had to follow a set of rules, or ‘protocols’, that were governed by cryptographic proofs. Furthermore, rather than relying on a trusted financial intermediary, the transactions made on this system would be validated by a network of connected users who could reach a unanimous agreement, or consensus, about who owned or transferred value at any point in time. To achieve this, Nakamoto combined preexisting computer networking and cryptography technologies in ingenious ways to create a platform that could act as a public ledger, or database, that anyone can access but no single person can control. By providing a decentralised, trustworthy, and immutable record of transactions, the platform allows individuals and institutions to collaborate, transact and share information with previously unheard-of levels of trust and transparency.  

Today this kind of platform is known as a blockchain, and put simply, ‘it is a machine for creating trust’. ‘The technology and cryptography that sits behind blockchain is complicated,’ writes Don and Alex Tapscott in Blockchain Revolution, ‘but the main idea is simple. It’s a platform for everyone to know what is true8 , at least with regard to structured recorded information. As such, it holds the potential for unleashing countless new applications…that have the potential to transform many things’. Here is how it works. Blockchains are distributed ledgers, or shared databases. Similar to online document sharing platforms, all participants on a blockchain’s network are given equal status and can submit, review and verify the records, or ‘blocks’ of information, in real time. When a block of information is recorded onto the blockchain by any user – whether this is a financial transaction between two people, a record of land ownership, or a refugee’s personal details – the data is instantly and automatically duplicated onto all of the other connected computers (or ‘nodes’) on the blockchain, rather than the record staying with a single, centralised authority. By automatically distributing the blocks of information across the whole network, the blockchain ensures that every user sees the most up-to-date information, the database has no single point of failure, and no single institution can control how the information is recorded, audited or managed. 

BLOCKCHAIN IN DETAIL

A blockchain carries only infrastructure cost and there is no transaction cost. The blockchain is a simple yet powerful way of passing information from people to people in a safe manner. One party initiates transaction process by creating a block. This block is verified by millions of computers distributed around the world using net. The verified block is added to a chain, which is stored across the net, creating a unique record with a unique history. Duplicating a single record would mean duplicating the entire chain in millions of instances. That is virtually impossible. Bitcoin uses this model for transactions, but it can be implemented in many others ways.

For example think of a railway service industry. We buy tickets via an app or using online transaction. The credit card company takes a fee for processing the transaction. With blockchain coming into the picture, not only can the railway industry save on card processing fees, it can move the entire ticketing process to the blockchain. The two parties in the transaction are the railway company and the passenger. The ticket is a block, which will be added to a ticket blockchain. Transaction involving money on blockchain is a unique, independently verifiable and un-duplicatable record (like Bitcoin), so can your ticket be. Where, the final ticket blockchain is the record of all transactions for every ticket ever sold, every journey ever taken

But the key here is, it’s free. Not only can the blockchain transfer and store money, but it can replace processes and models that rely on charging transaction fees.

Here is another example. The Fivver hub charges 0.5 dollars on a 5 transaction between individuals buying and selling services. Using blockchain technology the transaction is free.

Because blockchain transactions are free. Why should I pay The Economist or National Geographic an annual subscription fee if I can pay per article. Again, remember that blockchain transactions carry no transaction cost. You can charge for anything without worrying about the transaction fees taken by the third parties.

WORKING FLOW OF BLOCKCHAIN

The basic understanding of a blockchain is, think of a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet.

Information listed on a blockchain exists as a shared — and continually restored— database. This is a way of using the network that has benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet.

The reason why the blockchain has gained so much attention is that:

• It is not owned by a single person or an entity, hence it is decentralized.
• The data is stored inside using cryptography.
• The blockchain is immovable, so no one can duplicate with the data that is inside the blockchain.
• The blockchain is open for everyone to view so one can track the data.

ADVANTAGES OF BLOCKCHAIN

1. The transparency ensures that all the members of the blockchain can view the data on the block.
2. The immutability takes care to create a record of a transaction till it is agreed by all the parties involved to change that data so that it becomes permanent.
3. The decentralization – it is the copy that has been synched to the entire blockchain existing in multiple systems – that does not allow any possibility of data and security compromise.

DECENTRALIZATION – THE WOW FACTOR OF BLOCKCHAIN

The blockchain is considered as a decentralized technology. Anything that happens on the blockchain does not involve functions from a single entity or a single point but the entire network. This creates a new way to verify transactions.

It is this lack of centralization that makes us vulnerable that makes the hackers capitalize on. Today, we rely on a user specific combination to protect our identity where blockchain uses encryption methods. It would mean that we need specific combinations and access keys to get information on the blockchain.

The Bitcoin serves as a proof to know the possibilities of the blockchain. the Bitcoin was invented in 2008 and whatever problems that Bitcoin have faced has only been due to hacking or mismanagement. The fact that there are more than 1600 cryptocurrencies similar to Bitcoin is a resounding testimony of the potential and the possibilities of the blockchain. To get your own crypto exchange. To get a demo of how your site may look

BLOCKCHAIN APPLICATIONS

The advantages of blockchain pings many ideas of application. However, the strongest use case for blockchain lies in the domain of finance. The smart contract, the self-fulfilling piece of code, eliminates the need for all the middlemen and the proportional costs involved. However, the current blockchain system has not been made interactive. This gap can be bridged by using wallet-applications.

BLOCKCHAIN CHALLENGES INVOLVED

We have already seen that the blockchain uses encryption. The basis of the encryption is a combination of keys. There is the public key which is similar to your User ID that points to a specific address on the blockchain. There is also a private key which is similar to your passcode and it gives access to the assets listed on the blockchain.

While this combination can give you the most reliable security, it is important not to forget for the misplaced private key, losing the private key, that you use access to the effect that is stored in the blockchain. One of the greatest challenges in implementing the blockchain is ensuring the protection of the private key.

BLOCKCHAIN – THE VERSION OF WEB...

There might be speculations of the positives and negatives about the blockchain, it is unavoidable that the need and the understanding about blockchain are growing. The fact that the blockchain technology has been backed as a next-generation solution by major Global Giants like Deutsche Bank, Goldman Sachs, Morgan Stanley and even IBM which has created its exclusive smart contract, is enough to justify the intensity of how promising blockchain is.

Even on the job front, the demand for blockchain related talent has grown by over 600% in the past 4 years. Blockchain would find its utility in a lot of fields including finance, crowdfunding, governance, supply chain auditing, file storage, protection of intellectual property rights for creators, internet of things, identity management and in the tokenization of assets that we never imagined would be!