Blockchain Technology

Blockchain:Inception

The year 2008. The world collapsing around us. Carnage in financial markets led to global economic mayhem. The traditional bastions of trust and custodians of the ‘truth’ had been brutally exposed.

Paradoxically, it was during this chaos that a white paper emerged on the Internet and put forward a sturdy case for a system of direct exchange of cash via a blockchain. A form of exchange that would not require intermediaries.

Blockchain technology: Potent, Pervasive, Empowering and Liberating

Envisage a world where trust would be embedded in technology. A new trust paradigm where it is irrelevant whether one party trust the other or does not but instead both use technology that has trust at its core. Envision an environment where transparency, accountability and democracy reign supreme. Consider harnessing the power of technology to future proof your organization, to give it a competitive fillip hitherto impossible.

From the world of cryptography has descended a game-changer like no other. A technology so powerful, so unique and so adaptable, that which is the way of the world of tomorrow. A technology which eliminates third-party intermediaries, lowers transaction costs, powers efficiency, eliminates waste and creates and delivers superior value. That technology is the future of organizations. That is the mother of all disruptions. That is blockchain technology.

Using distributed ledger technologies, using smart contracts to automate business processes, creating an entirely different paradigm of trust and building efficiency through automation of processes. Blockchain technology can be used to monitor and record anything of value. Blockchains are a critical component of a broader ecosystem of technologies that will make up the new age of the internet (Web2.0).

The internet has evolved from being static and detached to a dynamic and reciprocal one. The internet in its present form is highly interactive but centralized with power being held by very large corporations. Web 2.0 will be a more versatile, individualized and flexible “Internet of Things” (IoT). Automation, decentralisation and secure networks will be critical components of Web 2.0 and this will be powered by the revolutionary blockchain technology.

Blockchain Technology: Key Considerations

The distributed ledger system that is at the heart of blockchain technology will replace the present centralized computing, storage and processing of information. It is an innovation that has far-reaching ramifications for the world at large and especially for businesses. The distributed ledger technology can be viewed as a data structure that is available on multiple computers crossing geographical and spatial barriers.

BLOCKCHAIN: NODES ON A PEER-PEER DECENTRALIZED NETWORK

A blockchain is essentially then a peer-peer ledger and as with all ledgers, transactions are recorded in these ledgers. The distinctions between the blockchain ledger and the traditional ledger are that while almost all traditional ledgers are private, blockchain ledgers are public and all the information within ledgers on a blockchain are accessible by all on the blockchain since the ledgers are by their very nature-distributed. This distributed ledger is the very essence of blockchain technology as a record-keeping system. A block is a collection of transaction batches. Blockchain offers a completely different perspective on how transactions within an entity are recorded and tracked. This has far reaching intra-organizational, inter-organizational and indeed global ramifications. Smart networks are the new generation of the transfer of information, value and indeed every other asset. These networks are secured via cryptographic algorithms.

DISTRIBUTED PEER-PEER NETWORKS WITH NO CENTRAL AUTHORITY FIGURE

Blockchains can be categorized into three categories: -

Types of Blockchains

1.Public blockchains

As the name suggests these are public and open access. These types of blockchains are also known as permission less blockchains. The blockchain's security relies on the need for proof of work or proof of stake. Anyone can download a copy of the blockchain onto a computing device and view the history of all transactions on that blockchain. Anyone can broadcast transactions. These transactions if verified as valid via computational work intended to solve complex mathematical puzzles to ascertain the validity of a transaction (also known as mining), would be included on the blockchain for the broadcaster and everybody else on the network to see.

2.Private Blockchains

Also known as permissioned blockchains, these are blockchains where the distributed ledger is private. These are used within organizations for internal purposes and where the deployment of private blockchains is necessary. Data is placed on the blockchain which in turn has nodes that have been granted prior approval to be on this private blockchain. The distributed ledger is used by pre-approved parties. These permissions and authorizations are centralized. For instance, exchanging financial information between accounting and finance departments and auditors. These blockchains can be likened to information transmitted across private intranets in comparison to public blockchains which can be viewed as the information on the internet. The participants in private blockchains are known but the transactions between them are kept confidential between blockchain members. Private blockchains are leveraging tools to help businesses gain greater control over and streamline business processes. Businesses can develop their own private blockchain and then invite those whom they want to (customers or suppliers for instance) to get onto their blockchain. Private blockchains enable organizations to determine precisely who they are dealing with. It is worth mentioning that private blockchains can be built upon public blockchains.

PUBLIC

MAINTAINED BY PUBLIC NODES

ACCESS FOR ALL

GENIUNE CHANGES BY ANYONE

PRIVATE

NETWORK CREATORS ASSIGN PERMISSIONS FOR DATA VALIDATION

ONLY THOSE WHO HAVE A GENUINE NEED TO KNOW CAN ACCESS DATA

3.Consortium Blockchains

These blockchains are not accessible by all but instead this blockchain is controlled by a certain number of pre-determined and pre-approved participants or nodes. Most members on that blockchain must approve the adding of a block to this consortium blockchain. If 20 banks form a consortium blockchain, then at least 11 of those 20 banks will need to approve the adding of a block. As is evident, this makes for a quasi-decentralized operating environment very dissimilar to the public blockchain.

Elements of a blockchain

Blockchain technology comprises certain key elements. It is first a peer-peer network which translates to communication being possible between nodes on the network without a central, controlling node or an intermediary if you will. Each node records and distributes to other nodes on the network. The database is thus a far cry from traditional centralized databases as no one node controls the data. This principle of distributed ledgers is a second key element of the blockchain. The third element is that records on a blockchain are chronologically-sequenced, and tamper evident. Any attempt to change, modify or delete validated and updated records would not be possible as each block in a blockchain as the name suggests, is chained(linked) to all other blocks. Each subsequent block bears a reference to the previous block in the chain. This is achieved by including the hash (which is a string of random numbers) of the previous block in the subsequent block. Tampering with data would cause that block’s hash to change which would alert the entire chain. The network would reject the changes attempted. ‘Immutability of records’ is an exceptionally powerful feature of blockchain technology. The fourth consideration is that blockchain allows for transparency among nodes as every transaction and its implication are visible to all on the blockchain. Every node has a public key which is a node’s public address on the blockchain. This is essentially a unique, randomly generated 30-plus character alphanumeric digital identity or address. Blockchain transactions occur between these cryptographic keys. The fifth element is the use of protocols. These are specific rules that govern the way the nodes on a blockchain communicate among themselves. Data is transmitted in a specified format to meet nodal expectations on the blockchain. Protocols are reached through consensus in the form of algorithms and clear rules that govern user interaction on the blockchain.

Having nodes on the network competing to solve complex mathematical problems is what is known as mining. This is necessary to fulfil the blockchain’s proof of work requirement. Once the problem has been solved, the miner who solves it, posts it to each ledger in the network. This exercise ensures the integrity of data on the blockchain.

Why blockchain excites us

DATA

Data is today viewed as being the most prized asset. Traditionally, individuals do not own data and value. Data and value belong instead to very large (and closed) enterprises who provide data security and validation services. This creates an undemocratic system susceptible to fraud and data tampering. These organizations incur heavy expenditure to ensure the integrity of data. Blockchain technology allows for empowerment of individuals by allowing them to own their data.

BLOCKCHAIN TECHNOLOGY: DIGITAL ASSETS ARE OWNED, SECURED AND CONTROLLED BY OWNERS

This technology removes the threat of a single point of failure inherent in centralized organizational structures. It also reduces costs significantly while also rendering fraud infeasible. There is no honeypot to attract malicious players.

Value is at the very heart of blockchain technology. Blockchain is a digital, decentralized receptacle for various kinds of assets while also providing a framework for the seamless and instantaneous transfer of value.Blockchain technology allows for individual ownership of value and the exchange of value through permeating and direct peer-peer networks. Value can be quantified by blockchain network tokens which represent any unit of value and can also be used for exchange for other precise embodiment of value. Tokens are digital and hence they can be programmed. For instance, they can be programmed so as not to allow for purchases from countries that have exchange of value in a services economy. Blockchain technology empowers in that it allows for uninterrupted and effectual tracking of value.

Blockchain: Fostering Collaboration and co-operation

Blockchain technology allows for concepts of frictionless and automated markets. Inter-organizational synergies based on trust, co-ordination and partnerships will generate tremendous value. Value delivery will also be optimized. Blockchain technology enables strategic collaboration and co-operation among enterprises benefitting them individually and consequently enriching the economy. Instead of focusing on competing, organizational focus will shift to collaboration resulting in far better outcomes for society. The distributed ledger technology that is at the heart of blockchain technology can be used to create a shared, credible database among organizations to change business and economic perspectives. This technology places a layer of trust over the internet. With the recording of transactions in ledgers having already moved to the digital world, the next switch is to distributed ledgers, secured cryptographically and shared across a global network of computers. The blockchain records are immutable and incorruptible.

Blockchain technology creates more markets allowing for peer-peer exchanges of small increments of value in secure, automated distributed markets. Giant boundaryless organizations will emerge which will be distributed, autonomous, instinctual and democratic. This technology has long-tail economic applications.

Blockchains can provide for economic inclusion of the marginalized billions globally.

Conceptual Shift

A case for the adoption of blockchain technology

The world is moving towards a decentralized global economy. We are moving towards a distributed consensus structure managed by many thereby harnessing the resources of many. This is based on blockchain technology that is scalable, resilient and highly efficient. In the new distributed marketplaces, barriers to entry are lowered or eliminated and divide is abolished. In this new paradigm, blockchain technology will allow for peer-peer ‘trust less’ exchanges of value without requiring a centralized authority.

Information
  • Distributed and Immutable
  • Easily accessible
  • Accurate
  • Tamperproof
  • Time-Stamped
  • Synchronized
  • Made available as per the parties, interest, need involvement and level of concern
Security
  • Trust embedded in the technology
  • Achieved through cryptographic tools(publickey / private key)
  • Each appended block references its predecessor
  • Proof of Work / Proof of Stake
Outcomes
  • Inherent trust
  • Better Decision Making and increased efficiciency
  • Transparent
  • Operating risks reduced
  • More accessibility for those on the fringes
  • Eradication of business friction
  • Decentralised: Reduced dependance on intermediaries and the traditional keepers of trust
  • Reduction of transaction costs
  • Anonymous / Pseudonymous
  • New appoach to communication - a flow of affairs
  • Swifter dispute resolution reducing the costs of disputes
  • No identity theft

Blockchain: A Critical Component of Enterprise strategy

We encourage organizations to embrace blockchain technology and re-organize themselves around this technology. Blockchain is ground-breaking and revolutionary. It has the potential to impact every industry and all firms within all industries. The technology which is self-governed mitigates business friction and eliminates barriers in a manner earlier impossible to achieve. The internet has presented us with previously unknown business models. Blockchain technology constructed on top of the internet is an indestructible storehouse of tamper-proof, data and a chronologically-ordered, persistent repository of information. The peer-peer network where everybody shares the public ledger has the capability to create and add value, re-establish the benchmark for efficiency, weed out intermediaries, drastically reduce transaction costs and indeed redesign business and economic landscapes. Blockchain establishes a new paradigm for the management of organizations. With blockchain markets, the speed of capital creation, value creation and value delivery will accelerate enormously. The distributed ledger changes our traditional notions of business communication. Every record is based on consensus among network participants. A valuable consideration is that blockchains are scalable in that as additional processes are introduced they can be incorporated seamlessly on the blockchain.

Blockchain technology is the source of much business focus as evidenced by the scores of blockchain projects world-wide. As is the case when the diffusion of an innovation begins, early adopters- agile organizations that take the disruption by its horns early in the piece and use it to fortify themselves in all respects have a distinct edge over others. These are those organizations who witness disruptive innovations as opportunities in the environment. You can have a blockchain for your enterprise that is developed in keeping with your strategic vision. Blockchain technology addresses enterprise needs starting at the foundational level. You can use blockchains to make payments, thereby reducing transaction costs and settlement times. All financial instruments can be registered and moved via a blockchain. Your blockchain can have smart contract functionality built in. These smart contracts are automatically executed(upon underlying conditions being met), immutable and protected from external interference. They reduce delays and consequent increase efficiency. With blockchain technology you can store larger amounts of data using no additional hardware. Therefore, among the other attributes of blockchain technology is its cost-effectiveness.

In a blockchain environment, it is simpler to keep an eye on digital identities. Supply chains making use of blockchain technology would empower your organization by ensuring efficiency and transparency.

Cross-industry Integrated blockchains would we believe unlock the full power of this transmogrified, pioneering technology. Organizations struggle with dispute resolution and the associated costs of disputes. Blockchains can significantly reduce dispute resolution time and thereby lower associated costs. The persistent and permanent characteristic of the blockchain renders it suitable for putting a variety of records such as titles of ownership on the network. Once up on the blockchain, they are secure and can be accessed whenever needed. Human error in recording transactions both wilfully and unwittingly can be eradicated using this technology. Blockchains can potentially eliminate fraud.

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