Blockchain - A Simplified Version

Blockchain is a distributed digital ledger. It’s like a giant, global spreadsheet that runs on innumerous computers. It can record any structured information beyond just who paid whom, but also who married whom, or who owns what land. It is open source allowing anyone to change the underlying code, and all can see what’s going on. It is an unchangeable, distributed database that maintains a progressively growing list of data records. It is not limited by the constraint of depending on governmental sanctions or any intermediary like a powerful bank or a credit card company to authenticate or to settle transactions. It’s truly an open and peer-to-peer permission-less system.

The importance of blockchain is not limited by being the precursor of Bitcoin alone. The ramifications of it is spread far and wide over a wide spectrum of possibilities as shown in Figure 4 below. For Internet of Things, an underlying blockchain-settlement system will be required, as banks will not be able to settle trillions of real-time transactions between things.

Figure 1 below shows a diagrammatic representation of the basic principles of Blockchain operation, and provides current statistics regarding its working

Figure 2 demonstrates the process of sealing (mining)

Figure 3 follows up by a schematic representation of the overview of the entire blockchain working method

Figure 4 deals with the wide spectrum of Blockchain applications now and in the future.

How Blockchain Works

Consider the normal process of transferring money from A to B (Figure 1)

No bank required. Register maintained by participants:

 Assume 5 participants (A to E) knowing each other’s accounts without knowing their identity.

Now, if participant B wants to send Rs. 10K to E, all participants will make a note in their page of B transferring Rs.10K to E. This continues for many transactions till the page is exhausted.

The completed page is put in a folder after Sealing (mining) it with a Unique Key (no.26382, see below) that everyone in the network agrees upon. Once sealed (or mined), no changes can be made forever.

How does Sealing (mining) work?

In a distributed and decentralised system as above, this seal will provide the trust, otherwise offered by the bank in normal transactions (Figure 2)

 Hash function exhibits the same word (abeac) for a specific input (14023) every time. Given the output, it is extremely difficult to calculate the input, but given an input and output, it is quite easy to verify if the input leads to the output.

IBM, US retailer Walmart and Tsinghua University have a joint effort to track the movement of food products in China using blockchain technology to improve food safety in the world's second-largest economy.

Blockchain technology, which powers the digital currency bitcoin, enables data sharing across a network of individual computers. It has gained popularity worldwide due to its usefulness in recording and keeping track of assets across practically all industries.

With blockchain, the movement of food products can be digitally tracked from suppliers including farms to the store shelves and ultimately to consumers.

A Jan 2017, World Economic Forum report predicted that by 2025, 10% of Global GDP will be stored in Blockchain or Blockchain-related technology

Ernst & Young has provided digital wallets to all Swiss employees. The firm has also installed a Bitcoin ATM in their office in Switzerland, and accepts bitcoin as a payment for all its consulting services

Blockchain is the next step in the evolution of the internet. It might even dwarf the benefits of internet. Blockchain has the following characteristics which score over the internet:

• Network integrity as trust is intrinsic
• Distributed power as P2P network is the very essence
• Security – confidentiality, authenticity and non-repudiation
• Privacy
• Rights reserved as participants hold ownership
• Incentive for miners
• Inclusion – ‘distributed capitalism’