What is Blockchain?

Blockchain concept was to solve many of the problem that traditional banking transactions faced from failed transactions, technical issue, daily limit, additional charges or transfer fee or account being hacked.

Blockchain is a type of database[i], a collection of information or data housed in one place for easy retrieval. This technology was created to enhance transactions using “computerized ledgers” [ii] within a shared public ledger leaving out the normal banking regularity.

This noncentralized architecture is one of many reasons why many users were curious about the trend as it utilizes peer-to-peer transactions that lead to a much faster compare to traditional banking. Similarly, anonymity and transparency features are what draws many users to this new scheme as it preserves confidentiality in every transaction.

 

How Does It Work?

Transaction within blockchain involved individual digital ledger and require both parties to agree on the transactions given that it is verifiable. [iii] This technology uses “asymmetric key encryption, hash values” to secure every transaction.  In a nutshell, once you created an account, you can right away announce your address to your family and friends to start conducting your transactions.

For non-technical readers, every transaction(s) is through a block and each block holds the record of each bitcoin own which is called a ledger. Similarly, each user has its own public key that everyone in the network knows of and a private key that is unique and no other users know about, for simplicity we could think of it as the email address as your public key and your password is the private key.

 

Is it Secure?

A private key adds another layer of security within the blockchain, as this is the requirement in order to conduct your transfer or transaction. How does this work? Every user (nodes) will sign each transaction using their private key before they can start broadcasting within the network sometimes called mining. Researchers also believe that timestamp adds another layer of security.

In summary, the concept behind the birth of cryptocurrency is not just to hype society or discourage the public away from the traditional way of banking. In fact, its existence must be view as a great challenge to revamp the financial industry and its regulations such as the high fee for transferring money. Traditional banking has many flows and its flows cause delays and each delay not only leave a frustrated client, but could cost a life especially when the transaction involves a life and death situation like a family sending aid to another family member.

The banking industry needs to improve in order to keep up with what bitcoin offers such as strongly resistant to modification by using strong cryptography, no third party application involved.

References:

[i] Bambara, J., Allen, P., Iyer, K., Madsen, R., Lederer, S., Wuehler, M., & Safari Books Online (Firm). (2018). Blockchain: A practical guide to developing business, law, and technology solutions (1st ed.). McGraw-Hill.

 

[ii] Quiniou, M., & Safari Books Online (Firm). (2019). blockchain (1st ed.). Wiley-ISTE.

 

[iii] Jaikaran, C., & Library of Congress. Congressional Research Service. (2018). Blockchain: Background and policy issues. Congressional Research Service.