What is BlockChain Technology? And Why it is so Revolutionary?

Blockchain a latest technological innovation that is in news from last few months especially after surging in price and popularity of Bitcoins (cryptocurrency) . Many people know it as a technology that is working behind crypto currencies, However, it`s potential uses extend far beyond.  Many technology entrepreneurs like Bill Gates and Richard Branson has admired it while many companies are falling over one another to the first to work out different ways to use it.

So what exactly is Blockchain and why finance and technology circles are so excited about it?

Let`s have a look what this technology can offer to businesses.

What is BlockChain Technology?

Currently, whenever we need to make a transaction, we make use of trusted middleman such as banks who handle our transfer of money. With Blockchain technology, the need for the third party like bank is removed while consumers and suppliers can connect directly. With cryptography to keep exchange secure, Blockchain provides a decentralized database, a digital ledger of transaction that is visible to everyone on the network. This network is a combination of chain of computers that all must approve an exchange to make verified and recorded.

Blockchain technology is comprised of four main elements that can help increase efficiency with a reduction in costs across business.  

• No Transaction without Consensus.  The transaction only takes place if all parties agree to network verified transactions.

• Records are Immutable.   Ledger records cannot be altered.

• Provenance of Transaction.  There is the provenance of records for each asset.

• Privacy Control.   There is appropriate visibility of transactions through permissions and identity feature.

“The Blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”

Don & Alex Tapscott, authors Blockchain Revolution (2016)

Blockchain is not magical technology but it has potential to transform the way we perform different business functions.  By using this technology certain transactions can be made tamper proof and more secure.

Having all previously discussed features like shared, un-editable for transaction history recording it does not only enhance trust of all parties involved. But also improve accountability, transparency across business networks. The whole process runs around ledger of records where each business has multiple ledgers for different business networks in which they are participating.   A transaction means a transfer of asset onto or off this ledger.

Another important aspect of Blockchain technology is that there no single control over record perhaps it is distributed across parties that have interest in it.  Whether it's financial record, shipping transaction, or car maintenance information whole record is distributed with specific permission over it that gives access to only specific people, so because the record is distributed among parties, therefore, there is no singular control over it.  If something happens to record in the server in case of disaster the record still exists in an unaltered state.

“Blockchain solves the problem of manipulation. When I speak about it in the West, people say they trust Google, Facebook, or their banks. But the rest of the world doesn’t trust organizations and corporations that much — I mean Africa, India, the Eastern Europe, or Russia. It’s not about the places where people are really rich. Blockchain’s opportunities are the highest in the countries that haven’t reached that level yet.”

Vitalik Buterin, inventor of Ethereum

What is BlockChain Technology not?

One thing is to be cleared that Blockchain technology is not magic that is going to resolve all the problems that are faced by us today. Nor it is in any sense going to relieve organizations from the responsibility of securing their private data, transactions and other sensitive information.  It is neither going to change unsafe internet user behavior that can be a major cause of information security breaches. However what it can do is in case a device is compromised, it cannot disrupt business operations by creating false records with in the business process.

Therefore by using Blockchain technology, we can be assured that security breach will not result in alteration of the business process because it’s private.

Why is it so revolutionary?

Blockchain technology is applicable for almost any types of transactions that have some sort of value that includes money, property, goods or any other items.  It can potentially be used in thousands of ways from tax collection to remittance transfer to family in other countries without need of banks.

The trustworthiness that comes with Blockchain technology while removing the role of the third party makes it potentially usable to business efficiency.

What are the advantages of Blockchain Technology?

• Save Time.     

The first advantage of using Block Chain technology will that it can significantly reduce the transaction time by making it instantaneous in most cases. The transactions that took days to complete can be completed in seconds. In past, all transaction took a lot of time while verifying important details about involved parties that cloud increased to even more in case anything goes wrong.

• Cost Reduction.

The use of Blockchain technology where through digitalization smart contracts can be embedded into it, the need for intermediaries like lawyers; auditors etc. can be significantly reduced. In addition to that, the additional layer of complexity due to them can also be removed.

• Reduced risk of record tampering, collusion, and fraud.

As the transaction record cannot be altered, there is a reduced risk that people will fraudulently tamper it or remove the record.  In addition to that due to digitalization, the possibility of human error in keeping a paper record is removed.

• Increased Trust Levels between Parties (devices).

Due to shared processes and record keeping the trust between parties is increased trust due it is due to digitalization and no possibility of record alteration as compared to a paper record.

• Automated trusted processes.

With Blockchain network everyone in the network has the ability to create a customized solution with their own business requirements logics while running same common ledger without any problem.

What are challenges?

Despite it offers great benefits like cost cutting, transparency and security, we don’t see it`s widespread adoption in the business. So question here is why it is still largely preserve of the tech savvy people. The answer for this is that there are many problems and issues that still need to be resolved.  In order to ensure that there is no variant in the system, it uses a “timed refresh cycle”. For “Bitcoins” it is set to 10 minutes but comes down to milliseconds with Internet of things causing significant increase in resource consumption. So one of the biggest challenge that is faced by block chain technology today is scale. Currently Blockchain based transactions make up of tiny fraction of internet data load that is about to explode due to internet of things (IoT) and Big data.  The block chain scales means the need of more resources required for encryption, storage and other functions. With current Bitcoin Block chain size of around 100 GBs , under right conditions and computational requirements for relevant activities like Bitcoin mining can put significant burden on local infrastructure.  

Although scalability is a big problem in block chain technology there are many other reasons that might affect it`s potential application in business world. Lack of trust due to Bitcoins reputation, Less knowledge, understanding, no regularity compliance and too much difficulty to use are the major factors that are affecting it`s ability to become main stream technology.