Page 41 - Banking Finance October 2020

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organization nor thought of as an application, but only a new Transaction from A to B Transaction from B to C Transaction from C to D
way of data documentation on the internet. The technology
txn contents txn contents txn contents
helps in developing different blockchain applications, for
example, social networks, messengers, games, exchanges, B’s address C’s address D’s address
online shops and many such more. In other words, it is very
must must
much like the present-day internet and that's why is also sign match sign match sign
being called as "The Internet 3.0".
A’s signature B’s signature C’s signature
The forms of the information recorded on a blockchain can
A’s public key B’s public key C’s public key
be many like transfer of money, ownership, a transaction, verify verify verify
an agreement between two parties, etc. To establish
sign sign
the authenticity of the transaction, it requires confirmation A’s private key B’s private key C’s private key
from several devices on the network such as computers.
Once an agreement is reached (called consensus)
A simple representation of how Blockchain/Bitcoin
between all the devices in the network, the information/
works, Source: Google Images
data is stored on a blockchain that cannot be disputed,
deleted or modified without the knowledge/agreement of
all the participants. Why Blockchain?
Advantages
In other words, the blockchain is resistant to alteration of The main reasons for the popularity of this technology are
data by its design and is a distributed open ledger to record Decentralisation, Transparency, Security and Immutability.
transactions between parties in a permanent way that is
Decentralisation/Distributed: Approach to distributed
verifiable and efficient. It is managed by a peer-to-peer
storage and verification of data and no need for a Central
network that follows a common protocol for communication
Authority - since the data is stored in many devices on a
and validation. Once any data is recorded, it cannot
network of nodes, it's highly resistant to failures (both
be altered retroactively without touching all the
technical and physical). Each node in the network replicates
subsequent blocks. This, in blockchain, mandatorily requires
and stores a copy of the database, thus preventing a single
the approval of all the participants/stakeholders in the
point of failure.
network.
Transparency: In a distributed ledger, all the participants
in the network share
A verified transaction
can involve any the same data which
digital asset
can be updated only
Validation through consensus.
Requested
The network of
transaction is nodes validate the Security: Transactions
A transaction is broadcast to the transaction
requested p2p network of following the in a blockchain must be
nodes protocol agreed upon before
Once verified, the they are recorded and
transaction becomes a
part of new block for later encrypted and
the ledger linked to the previous
transaction.

Immutability: Ability to
The new verified block gets
The transaction added to the existing remain unaltered and
is complete blockchain indelible.

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