The title of this article may be a bit of a misnomer. In actuality, the name “Blockchain” is more properly described as a way to store the history of transactions involving the sale and purchase of digital currencies, not as an internet protocol for tracking time. The protocol that does this is called “Bitcoins,” which was the original name of the virtual currency backed by cryptography. The protocol is not quite the same today as it was back in the days when it was first developed. Back then it was developed to be able to transfer funds to remote places using banks. The problem was that only a handful of people had the technological expertise to use it efficiently.
With the advent of applications that make the transfer of money and other goods worldwide easy, the need for theBlockchain original bitcoin protocol had to be created for security purposes. The “blockchain” was born. The word “blockchain” comes from the Greek word for “a path,” indicating that every transaction in the chain follows a specific path. In its most simple form, it is a ledger of transactions that is mathematically guaranteed to exist and to be accurate, thanks to the fact that it is controlled by a network of computers. Through the use of “digital cash,” the entire chain of ownership is publicly accessible, making the entire system practically immune to theft or fraud.
The basic design of the Blockchain consists of a collection of independent servers called “nodes.” Each node connects to the rest of the nodes on the network, which allows for the chain to span the entire globe. Because of the distributed ledger technology that is at its core, the Blockchain serves as a clearinghouse for financial transactions, reducing the opportunities for fraud and allowing for accurate accounting. Transactions are recorded into a public account, called a block, which can then be accessed by anyone wanting to access the ledger. A digital certificate is sent to each node, confirming that each transaction has been properly completed and is truthful.
In order for the Blockchain to work at its fullest capacity, it must be considered a distributed ledger, meaning that all the transactions happening in it must be accounted for and guaranteed to be accurate. This is where distributed ledger management systems enter the picture. By providing a series of different back-end services, such as load balancing, security monitoring, transaction processing, and reporting, these systems take the guesswork out of managing the Blockchain, allowing businesses to focus their time and resources on more important aspects of their business.
Distributed Ledger Technology also takes full advantage of the speed and versatility of the ledger itself. Unlike the centralized approach used by the likes of Visa and MasterCard, the bitcoin network operates completely online. Transactions can happen instantly, making it an ideal choice for international currency trade. Because the ledger is entirely online, the entire process is fully secured and kept confidential, eliminating the possibility of outside interference.
Transactions on the ledger are protected by two factors: censorship and transactional privacy. By censoring which blocks transactions occur on the system, the network ensures that only those who need to have access to the information can make them. By maintaining transaction privacy, the system prevents third parties from accessing the inner workings of the block. Transactions are not broadcast to the network, eliminating the possibility of abuse and hacking.
A new block is created when a transaction has been validated on the main chain and is accepted as being valid. When a miner begins validating this new block, the work that needs to be done on the old chain is moved to the new chain. Miners continue to validate and verify this new block, making sure that all required signatures are present and that the correct new blocks are being created. When all of this work is completed successfully, then another block is added to the ledger. This new block becomes the new protocol. The protocol carries forward from one central point to the next, all the while ensuring that all necessary steps are performed to ensure that the new protocol is implemented correctly.
The Blockchain allows for real time transactions and offers an elegant solution to the problems inherent in sending money over the internet. Transactions are secure, fast, permission based, and completely fruitless, since no third party is needed to validate or approve of a transaction. Transactions can take place twenty-four hours a day and seven days a week, with each node providing its own unique set of transaction validation criteria. This method of transfer offers an economical solution to global issues of remittance and security. With a Blockchain, you no longer need a bank, a broker, or a middleman.