A blockchain is a chain of blocks that contains information. It can be pictured as a huge accounting book where the records (the blocks) are interlinked and encrypted to protect the security and privacy of what is in the blocks. It is, in other words, a distributed and secured database, open to anyone (in the case of a public blockchain), and that can contain all types of transactions, not only economical ones. To make it simple, each block contains three elements: the data, which depends on the type of block (for a transfer of bitcoins for instance it will be the sender, the receiver, and the number of bitcoins), and the hash, which is a unique fingerprint-like that identifies the block and its content, and the hash of the previous block in order to create the chain.
The interest in a blockchain is twofold. First, the content of each block is validated by the users of the blockchain. To sabotage a blockchain, one would need to have control over 51% of the users of that blockchain, which is not possible. Second, once the content of a block (a transaction for instance) has been validated by the community of users, it cannot be changed anymore and will be forever part of the blockchain as long as the chain exists. This makes a blockchain not only an indestructible ledger of information of all kinds but also a very useful tool of traceability as anyone can access all the blocks in the chain.
Blockchain technology is a novel technology that makes use of its namesake 'blockchain', which is an open, distributed ledger consisting of a ‘chain’ of 'blocks'. Blockchain technology is touted as the next big game-changer after the introduction of the Internet, which has the potential to revolutionize the world and its economy unlike anything else. Blockchain technology refers to the framework that stores transactional records of the public, known as 'blocks', in several databases, known as the "chain", in a network connected through peer-to-peer nodes. This storage is usually referred to as a digital ledger. Every transaction in this ledger is authorized by the digital signature of the owner, which authenticates the transaction and safeguards it from tampering. Hence, the data stored in this digital ledger is highly secure. It allows for securely transferring the ownership of units of value using public-key encryption and proof of work methods.
In order to manage the network, blockchain technology uses decentralized consensus, which means it is not centrally regulated by a bank, company, or government. In fact, the bigger the network expands and becomes more and more decentralized, the safer it becomes. Blockchain technology, therefore, facilitates the substitution of a single master database or ledger by a decentralized record of transactions – the distributed ledger.
Blockchain technology has the potential to create new foundations for our economic and social systems. The utilization of blockchain technology will have a far-reaching impact on the world at large. Being the most transformative technology in recent history, Blockchain technology will enable both new industrial applications and also modernize many antiquated ones. Although centralized systems power the institutions of the world and have demonstrated the ability to cope with millions of transactions from mainframe to modern public or private cloud, blockchain offers an alternative future. The prospect of decentralization comes with it, boosting expectations of democratization and stoking the fears of many monopolized organizations.
Areas ranging from Banking and Governance to Healthcare, the Internet of Things and a host of others, will be deeply benefited by the emergence, of Blockchain technology. Blockchain is a distributed ledger system which is a list of records of data and transactions arranged in a block and arranged in a chain, secured by a cryptographic hash function. Every block that forms the blockchain contains a cryptographic hash that acts as a security of the previous block, a timestamp, and the data of the transaction.
The blockchain is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way"[1]. Every system connected to the blockchain is a node. The blockchain basically consists of a set of nodes that are connected to each other on a peer-to-peer basis. Any change made to the transaction in any one block gets recorded in all the nodes connected on the chain. Therefore it becomes impossible for the block to be changed in any manner without it being reflected in the block on all the other nodes. This provides the security of the data on the blockchain as any unauthorized change cannot be made on the blockchain as each of the blocks will approve a change to any other block only if it is done in an authorized manner. “Decentralized consensus has therefore been claimed with a blockchain”.[2]
With the recent bitcoin and cryptocurrency revolution blockchain technology has now become the fastest developing technology in the computer space. And this development of technology is contingent on the law that plays a huge role in the application of technology in the day-to-day activities of the modern-day world.
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[1] Lakhani & Karim R., The Truth About Blockchain, 95 HARVARD BUSINESS REVIEW 118 -127, Harvard University (January 2017)
[2] Raval & Siraj, "What Is a Decentralized Application?". Decentralized Applications: Harnessing Bitcoin's Blockchain Technology 1-2 (O'Reilly Media Inc.. ISBN 978-1-4919-2452-5, 2016).