The breakdown of blockchain technology

| June 30, 2017

Blockchain is a technology that allows for the movement of digital money from one person to another, or among multiple people. One of the key features of blockchain is that there is no centralisation of money, transactions are open and public. Everyone involved in the ledger, or account book, must validate transactions before they are approved.

Blockchain allows for digital Money transfers. It aims to remove third party participants, such as banks, and instead creates direct transfers from person A to person B, or in transactions involving more than two people. Transfers of money no longer take three days to be processed, instead, transfers occur immediately. Indeed, one of the main reasons that Blockchain has grown in popularity is that they improve time-efficiency and decrease costs; participants will no longer have to pay fees to a third party. Blockchain works under three basic principles

  1. Open Ledger (Account Book)- Transactions are open and public to everyone involved. Everyone in the network at any point in time can see where the money is, how much money everyone currently has in the ledger, and every person involved can decide if a transaction that occurs is valid. For example: If four people want to move money from one person to the other, each transaction will be linked to the initial one, creating a connection between the transactions. An open ledger prevents people from making underhanded transactions.
  2. Distributed Ledger- Everyone involved will have a copy of the ledger. There is no centralization of money or information because once a transaction occurs, Blockchain distributes a copy to everyone involved. Multiple copies of the transactions are distributed and available for access. Because there are many copies, Blockchain must ensure that theses copies are synchronized. Bringing in the third principle
  3. Mimers- Are a different nodule that keeps transactions in succession. For one person to add a ledger, a different person must validate. The individual that verifies the transaction receives a financial reward. Verifying a transaction involves two steps
  • Verify- The person verifying the transaction, or Mimer, will decide if the person that is initiating transaction has sufficient funds to carry out his request. Validating a transaction is easy because the ledger is open and they can see if the person has the money, or if they do not have the money.
  • Find Key- To add a new transaction to the account, you need a key. The Mimer must first solve the key. They will have to do computations and guess until they find the key the fits the ledger. Once the Mimer solves the computations, other people in the ledger will be able to add it to their network.

Blockchain will transform the way we do business as organisations and individuals will be able to oversee their own account book. We will no longer have to share private information with third-party institutions, such as banks, which will decrease the risk of hacking. Without the centralisation of information, the possibility of having our information stolen will decrease. Blockchain has the potential to revolutionise data security as it enables us to take our privacy into our own hands.

Summary: Blockchain allows for digital transactions to occur between a network of individuals. Operations are open and public; everyone can see where the money is and how much money each person currently holds. Everyone has a copy of the account, which removes the need for a third-party institution. The risk of hacking will decrease because transactions will be quick and transparent.