This website uses cookies. By continuing to browse the site, you are agreeing to our use of cookies
Financial Services
May 30, 2017
(This the second blog in series of a 4 part essay on Blockchain 101. For the previous article, please click here.)
Post financial crisis of 2008, Satoshi Nakamoto, the founder and creator of Bitcoin, conceptualized the first Blockchain on a paper, which went on to become the core foundation of Bitcoin, a digital cryptocurrency, the following year.
A Blockchain is a distributed database that maintains a continuously growing list of ordered records called blocks. Each block contains a timestamp, a link to the previous block and transaction information. By design, Blockchains are inherently resistant to any external modification. The data once recorded in a block cannot be altered retroactively.
Blockchain offers a unique way of transactions between two parties and enables an ‘internet of value’ by its following properties:
To sum it up, Blockchain does not require powerful intermediaries to store, move, transact, exchange and manage assets. And, since almost every physical thing can be represented digitally whether money, land records, shipping consignments, votes, health records, music etc. the possibilities are infinite and beyond the scope of current digital currencies’ applications Blockchain is the native medium for value.
Let’s break down the tech. Blockchain or Bitcoin is based on 2 cryptographic techniques:
A party can securely send a message by encrypting with the intended recipient’s public key, which only the latter can decrypt. Or a party can digitally ‘sign’ a document by encrypting it (or more likely, its hash) with his or her private key. Anybody can then use the sender’s public key to decrypt the document, thereby confirming that only the owner of the associated private key could have sent it.
A Bitcoin, simply is a sequence of digital signatures, each certifying transfer from one pseudonymous holder to the next. Each payer signs with his or her private key, a record of transfer to the recipient’s public key. The transaction record contains a hashed summary of all the previous transactions. So, any user can check that the record of one transaction was indeed correctly hashed into the next and thus trace an unbroken series of valid transfers back to the creation of the coin. Same methodology works for any other Blockchain.
Your ownership of the asset is as good as long as you remember the Key. Many Bitcoin owners have lost their ‘Keys’ to the wallets and therefore cannot access their money anymore. So much for an anonymous decentralized secure ledger.
Every outcome starts with a conversation