Do we really understand BLOCKCHAINS and BITCOINS ?
Conventional recordings of data in multiple ledgers are slow and inefficient which can be altered retroactively and are often unverifiable. The same data may be recorded differently by various agencies, such as banks, customers, regulators or auditors. Block-Chain (BC) technology employs shared ledgers or computer blocks where the same information as high volume of transactions and operational instructions, can be stored in an immutable form. These are simultaneously available to all stakeholders, who may/may not be known to one another.
Storage may be private or public, depending upon the consensus among the participants. Data visibility is determined by the extent of permissions, granted by the users to those concerned, at an appropriate level of accessibility. Unauthorized persons are thus denied access to personal information by incorporating what is called a smart contract. These decentralized blocks hold valid transactions that are encoded and form chains. Block-Chains are thus chains of authentic computer blocks shared as transparent public distributed ledgers.
These chains keep growing when more blocks of additional transactions, are added. Each block is linked to the next by a hash, a digital fingerprint or unique identifier of 26 -35 letters and numbers, beginning with 1 or 3. It prevents any subsequent insertion or alteration. Chains record only user addresses and provide a time–stamped validation to each transaction. No intermediary third-party assurance or single administrator is required between the users. Absence of a centralized repository minimizes the chances of any fraud.
Originally the Block-Chains technology was developed by Nakamoto in 2008 for secure transactions and storage of a unique new type of cryptocurrency. Though BC technology is a useful platform for this currency, known as Bitcoin, the two are not the same. Blockchains find applications now in many fields such as recording of medical data, educational progress, supply chains, friction-free business, trade agreements, government land-records and transportation procedures, besides banking. The World Economic Forum (WEF) had predicted recently that by 2025, more than 10% of the global GDP would be handled by Blockchains technology. In addition to Bitcoin, some more virtual currencies, such as Altocoin, Ether, Coinsquare and Dash, have also been developed now.
Transactions are the global transfer of value of money between bit-coins that get safely included in the block-chains and also for wealth generation (called bitcoin mining). The process is somewhat similar to the working of emails. The main difference is that bitcoin addresses can be used only once and have two parts; a common private key or password and a public key or variable ID number. One can generate more addresses by changing the public component, when more transactions are to be carried out directly. An address can be disclosed to a trusted person who wants to make or receive a payment. Since no social security number or personal information such as bank account number is required, the anonymity of all users and the privacy of their transactions are assured.