How Block Chain Will Change Everything In Upcoming Years!!

These days if you are not hiding in some cave or living a life of hermit, you must have heard this term before and though people are curious about it but they don't really understand what it is and what it can do.

Or even if people know anything about block chain, they just say it's same as bitcoin. The only thing here I can say is, Bitcoin is to block chain what email is to internet.

Now let us think about why this block chain technology evolved. The were three main reasons why this was first introduced by a Japanese Satoshi Nakamoto in 2008.

1) Slow financial transactions due to multiple entries required in different bank ledgers.

2) Lack of Trust on financial institutions.

3) To eliminate intermediaries as they collect a small amount of money for every international transaction of money.

Now let's understand in the most simple term what is block chain. And how it works.

To understand what actually a block chain is let us see it's definition "A block chain is an incorruptible distributed digital ledger of transactions that can be programmed to record, virtually everything of value" 

We can have a better understanding of the block chain by looking at how a financial transaction takes place in blockchain. 

To perform a simple transaction between two people A and B, both of them need to have access to a program called wallet (In today's language it is your account). Now as only you being the owner of this wallet should be having the privilege to spend money from it, so it comes with encryption keys. A pair of public and private key.

Public key is known to other people on the network , while private key is just known to the owner of the wallet.

Whenever A wants to send some money to B for any product or services he encrypts the transaction with his private key first and then with B's public key.

This encrypted transaction gives information to different nodes (computers connected on the blockchain network) that the transaction is taking place between A and B.

Now, when transaction is about to take place, it needs to be verified. Currently the verification part of any financial transaction is being done by banks, as they maintain record of our balance in their ledgers. Similarly in case of block chain technology these ledgers (database) are maintained by all the nodes which are connected to the network and are responsible for validation of such transactions.Thus this technology is often known to be based on distributed ledger technology.

These ledgers do not maintain the information about the balance of different customers, rather they just keep track of every transactions that has taken place within the network for a particular wallet.

The verification of transaction is done by keeping track of links of incoming transactions (also called inputs) to A's wallet and comparing it with the amount of money which is being sent to B. The incoming links to A's wallet should amount to be equal or more than the amount being sent to B.

Like the above transaction, there are many other transactions, between different people on the network take place at the same time, so a fixed amount of such transactions are grouped together and a block is formed.

Every newly formed block is attached to the previous block of the existing chain of blocks (containing all the previous transactions before)

In order for this new block to be added to the block chain, every node tries to solve a complex mathematical problem created by using an irreversible hash function.The node that provides the correct solution to the problem, broadcast it to the network and when verified by other nodes, gets added to the existing block chain.

Each block contains these transactions as well as link to the previous block , thus forming a chain of blocks, thus commonly referred as block chain. The blocks are in chronological order of transaction timestamps. 

As each block contains a reference to the previous block , and that reference is part of the mathematical problem that was solved in order to spread the following block to the network. So it’s extremely hard to corrupt or change a block or series of blocks in a block chain thus making them incorruptible and permanent.

As a way of maintaining block chain due to software errors and loss of wallets password, a reward is given to those that solve the mathematical problem of each block. The activity of running the block chain software in order to obtain these rewards is called “mining” - very much like mining gold. 


This reward is the main incentive that pushes private people to operate the nodes, thus providing the necessary computing power needed to process the transactions and to stabilise the block chain network.

So, here what is different than the current way of banking transactions? 

1. Here we have distributed ledgers, unlike banks having a central database. 

2. No single organization or third party intermediaries for the processing of transactions. 

3. Better trust factor, as no one has to trust any organization or person rather just trust a concrete process of block chain. 

This way block chain will decentralised the current existing infrastructure and will provide you with a more secure and trusted solutions. 

As the blocks can contain anything in the digital format, so block chain is not limited to financial transactions, this can have anything, from health records to music to pictures, videos, land deeds to Universal id's to having a universal digital currency to supply chain information. Anything you can think of that can be put in digital content can be a part of block chain.

Let me explain a scenario, suppose we want to purchase any online course, which requires you to pay through PayPal. Now when block chain will be available, a transaction for transfer of fund can be made to the course provider's account through block chain and in return he will unlock the content for you to browse. As here we can see only peer to peer interaction between course provider and customer is happening and no other third party is required to validate the transaction. 

Likewise, suppose we want to purchase protein box in India that is manufactured in USA, from an authorised distributor or a retailer , so when that protein box started from USA, a block was added to chain, as it reaches different distributors an entry in the chain is made and finally when it reaches to the retailer in India a final entry is made to complete the supply chain. Now when the customer purchases it, he can simply verify the authenticity of the box by going through the block chain with an application in his mobile, if it reflects an uncorrupt block chain present then the product is genuine. 

Though currently block chain design still has lot of shortcomings but if the challenges are handled well then we will have better trusted peer to peer  commerce between different organisations, products and countries. So that rather they be competing with each other for having an edge , they might collaborate to give the consumers a better design and facilities.

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