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Blockchain is a technology that records transactions in a way that is distributed, immutable and openly available to anyone. In the basic format, it is a chain of blocks that record all the transactions done in the chain and that is saved on all the nodes in the network with the help of encryption. The nodes share a consensus of the status of the chain and of the following block to be added (1). A blockchain is a decentralized digital ledger of transactions that are processed by a distributed or peer-to-peer network (2).
Different Kind of Blockchain
There are both public and private blockchains. The public version is open to everyone to inspect and join. The private versions are usually called permissioned blockchains since permission is needed to join them.
Some blockchains, the best-known being Ethereum, add the possibility to save and run ‘smart contracts’ on the blockchain. A smart contract can be a regular financial contract that manages conditions for payments or, for example, a voting system that controls the whole process from registering voters to declaring the outcome of the vote. These contracts are also immutable and fully automated (1).
Although it was originally created for trading Bitcoin, blockchain’s potential reaches far beyond cryptocurrency. Blockchain ledgers can include land titles, loans, identities, logistics manifests – almost anything of value. The technology is still new, but the potential impact it can have on a business is exciting, and immense (1).
The digital economy is redefining business-as-usual. By embracing new digital technologies in an increasingly mobile and connected world, companies of all sizes can enhance consumer experiences, streamline operations or create entirely new data-driven products and services (2).
Block and Cryptography
To create a secure record, a transaction—called a “block”—is transmitted to each node on the network. Using cryptography, each node approves the transaction as valid and then encodes the block in a “chain” of multiple transactions that each node stores. In other words, a single transaction must be validated, synchronized and recorded across the entire blockchain network instantaneously (see Figure “Modern Transactions Are Distributed,”) (2).
According to financial consultancy Greenwich Associates, financial and technology companies will invest in blockchain technology. By the 2020s, professional services network PwC expects blockchain-based systems will reduce or eliminate many points of friction for a variety of business transactions; individuals and companies will be able to exchange a wide range of digitized or digitally represented assets and value with anyone else (2).
References:
- Mattias Erkkilä, What use is the blockchain for journalism? The London School of Economics and Political Science. 2019
- Bruce Rogers, Doing Business DIGITAL ECONOMYIn-the-Moment. Transforming Transaction Processing for the Digital Economy, Forbes 2016
Lucubrate Magazine November 2019
The picture on the top of the Article: Blockchain Information flows in the digital global networks. 3D illustration of data cells with binary code elements. By Siarhei (Adobe Stock).
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