Better Technologies, Better Results

Blockchain – Technology Behind Bitcoin

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Blockchain technology is an irrefutably ingenious invention-conceptualized by a person or a group of persons under the pseudonym – Satoshi Nakamoto in 2008 and was implemented the following year as a core component of Bitcoin where it serves as a public ledger for all transactions. Being the brainchild of an antonym, there were no apprehensions of failures as it was well conceptualized and an added advantage to this was that this invention of Blockchain for Bitcoin made it the first digital currency without the need for a trusted authority or central server.

Since then, this ingenious invention has evolved greatly into something, but is still incomprehensible to legions of laymen because of which the main question everyone is inquisitive about is: What is Blockchain?  

By design, Blockchain is unsusceptible to modification of data.

It is the platform that enables Bitcoin(digital cash) and other crypto-currencies to be exchanged. By design, Blockchain is unsusceptible to modification of data. It is an open, distributed ledger that can record transactions between two parties efficiently in a confirmable and permanent way.Decentralized consensus has therefore been achieved with Blockchain.

As a matter of fact, the most uncomplicated way to unravel this conundrum of Blockchain technology is to first grasp the concept of Bitcoin and then anticipate the mechanism or technology behind Bitcoin, which is Blockchain technology. Bitcoin, the prime mover of Blockchain technology, is a worldwide ledger and yet extremely complicated and no one definition fully encapsulates it. By analogy, it is like being able to send a gold coin via email. Bitcoin is the first decentralized digital currency. Bitcoins are digital coins you can send through the internet. It is a consensus network that enables a new payment system and complete digital money.

One of its major advantages is that it is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen.

Compared to other alternatives Bitcoins have a number of advantages: Bitcoins are transferred directly from person to person via the internet without going to a bank this means that the fees are much lower, you can use them in any country, your account cannot be frozen and there are no prerequisites or arbitrarily limits. One of its major advantages is that it is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen.

Several currency exchanges exist where you can buy or sell Bitcoins for dollars, euro and more. Your Bitcoins are kept in your digital wallet on your mobile or your computer device. Sending Bitcoin is like sending an email and you can purchase anything with Bitcoin. The Bitcoin network is secured by individuals called miners. Miners are rewarded newly generated Bitcoins for verifying transactions. After transactions are verified they are recorded in a transparent public ledger.

Bitcoin opens up a whole new platform for innovation. The software is completely open source and anyone can review the code. Bitcoins are a great way for businesses to minimize transaction fees, it does not cost anything to start accepting them and easy to setup and there are no chargebacks.

Bitcoin has not just been a trend-setter, ushering in a wave of crypto-currencies built on a decentralized peer-to-peer network; it’s become the de facto standard for crypto-currencies. In fact, Bitcoin is a crowd-puller because of its fascinating features. Bitcoin is secure because it verifies transactions with the same state- of- the- art encryption that is used in banking, military and government applications. It is open and nobody owns it; the most popular client is maintained by a community of open source developers. Using the Bitcoin network is free except for a voluntary fee, you can use to speed up transaction processing.
Bitcoin is changing finance the same way web change publishing. When everyone has access to global market, great ideas flourish.

Bitcoin technology, also known as Blockchain technology is the shared public ledger on which the entire decentralized, distributed peer-to-peer Bitcoin network relies. All confirmed transactions are included in the Blockchain so that the Bitcoin wallet can calculate the spendable balance and new transactions can be verified.

A transaction is a transfer of value between Bitcoin addresses that get included used to digitally sign transactions to provide a mathematical proof that they are valid. Bitcoin wallets keep a secret piece of data called the private key which is used to sign transactions to provide a mathematical proof that they came from the owner of the wallet.

A digital signature prevents the transaction from being modified by anyone once it has been signed. All transactions are broadcast between all users and usually begin to be validated and confirmed by the Bitcoin network within a few minutes and mostly within an hour.

In this era of technology where advancements are taking place at a fast changing pace, making the world more digitized and advanced, the emergence of Blockchain has stimulated and strengthened the roots of digitization but with digitization comes great challenges and regulating crypto-currency is amongst one of its challenges.

At the outset, it is essential to understand the difference between virtual currencies (VCs)- a term now synonymous with crypto-currencies and electronic money. While electronic money is legal tender that can be stored on a chip, VCs are a form of money or currency which does not derive its value from any sovereign authority, but by its technology. More specifically, crypto-currency relies on principles of cryptography to implement a decentralized peer-to-peer ledger.

A recent report suggested that crypto-currency transactions have led to concerns regarding consumer protection, money laundering, and financing of criminal activities. By design, crypto-currencies allow anonymous funding; potentially acting as conduits for money laundering and terror financing. The consumer protection, in particular retail consumer protection concerns, stems from their volatile nature.

The clamour around regulation of crypto-currencies poses a pertinent question: what is the optimal policy choice? Is a ban potentially more fruitful than regulation? Even if regulated, will the execution be foolproof? These are valid concerns, aggravated by the pace of evolution of this technology, which has outstripped regulation.

After making a splash in the telecom sector with its free offers and hyper-competitive tariffs; Reliance Jio Infocomm Ltd plans to create its own crypto-currency, JioCoin.

Indian companies are also assimilating the Blockchain technology to provide better financial services. After making a splash in the telecom sector with its free offers and hyper-competitive tariffs; Reliance Jio Infocomm Ltd plans to create its own crypto-currency, JioCoin. Akash Ambani, Mukesh Ambani’s elder son, is leading the JioCoin Project. Reliance Jio plans to build a 50-member team of young professionals to work on Blockchain technology, which can also be used to develop applications such as smart contracts and supply chain management logistics.

The company plans to hire 50 young professionals with the average age of 25 years for Akash Ambani to lead. There are multiple applications of Blockchain (for the company) .The team would work on various Blockchain products a person familiar with the development said on condition of anonymity. The most popular and commercial application of the technology has undoubtedly been crypto-currency, and Reliance Jio also plans to create its own version called JioCoin.

One (application) is crypto-currency. We can deploy smart contracts. It can be used in supply chain management logistics. Loyalty points could altogether be based on JioCoin the person cited above said, adding that all of this was “in proposal stage.”

“Reliance Jio also aspires to get into Internet of Things (IoT). Blockchain technology would come in handy there” the person said.

Bitcoin and other crypto-currencies have come under the scanner of governments across the world as their soaring prices attracted speculators and unsophisticated retail investors in droves. On Thursday, Bitcoin dropped as much as 12% to $12,801, its lowest since Christmas day, as South Korea’s justice minister reiterated his proposal to ban local crypto-currency exchanges, Bloomberg reported.

 

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Pragya Saxena

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