Blockchain was firstly
introduced in October 2008 as the original source code for virtual currency system,
bitcoin. It is the initial application of blockchain as a transformative
technology. Subsequently, code was transferred as an open source code in January
2009. Since then blockchain is rapidly growing as a disruptive technology,
which has the ability to replace the traditional models due to its unique
characteristics – high accountability and low-cost.

Blockchain
is a continuous list of growing records which use cryptography to link and
secure records which are called blocks. Every block contains a hash of the
previous block and it builds a chain of blocks initiating from the genesis block
(first block) to the current block. Mechanism of blockchain assures each block follows
chronological order or else, the previous block hash would be unknown.
Therefore, it is built as a linked chain of blocks. Any modification to each
block should be supported with the regeneration of previously connected
records. In consequence, blockchain has become an incorruptible digital ledger
of economic transactions that can be automatically programmed to virtually
record everything of value in a verifiable and permanent way.

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                                    Figure
01.   Formation of Blocks

                        (Black
– series of blocks from the genesis block to current block

                          Blue – orphan blocks exist outside the main
chain)

 

In a blockchain system,
ledger is replicated in a large number of identical databases, where each is maintained
and hosted by an interested party. When transactions occur, records of values
are permanently entered in all ledgers. It eliminates the cost and time of
third party intermediaries to verify or transfer the ownership of assets.

In addition, every
process, task, and payment in a Blockchain is supported by a digital record as
it is done by identifying, validating, storing and sharing records on a public ledger.
This mechanism is to ensure the highest degree of accountability and
transparency of the system. It eliminates the human and machine errors and
certify transactions in a much more efficient, faster and transparent way.
Furthermore, it safeguards its record from potential hacking and manipulation
threats by operating as a decentralized version of a database.

 

                                                            Figure 02

 

Modern world tech giants
such as Microsoft, Intel and IBM has made significant investments on this
revolutionary technology. For instance, IBM dedicates $200 million and 1000
employees to support the blockchain powered projects. It predicts that the
global market for blockchain is expected to be worth $20 billion by 2024. Major
European and American banks such as J.P Morgan Chase, Citigroup and Bank of
England are exploring Blockchain solutions to facilitate their transactions. At
present, Blockchains are mainly integrate into systems of keeping track of
credit default swaps of financial institutes. In near future, Blockchain has
the potential of disrupting the entire financial and banking industry and it is
estimated that banks could save $8-12 billion annually via adopting blockchain
technology.

At present, Evolution of
the blockchain protocol has widen the scope of the adaptability of the
technology for different industries. Nowadays, tech savvy Law firms use
Blockchains to provide multi signature account services for asset protection,
estate planning and dispute resolution by using a public ledger. An application
called OpenBazaar uses blockchain to create a peer to peer eBay transactions by
enabling peer to peer payments and direct interaction between parties without
intermediaries. Furthermore, the blockchains could be effectively integrated
into stock trading. There is a potential for added efficiency in share
settlement. For instance, LinQ Company, in partnership with blockchain startup,
Chain, initiated its first share trade powered by Blockchain technology where
transections are settled within seconds, securely and verifiably. Moreover,
blockchain can be effectively integrated into supply chain auditing and
governance. Provenance Brands, a UK company has recently commenced a pilot
project by using Blockchain to ensure that fish sold in restaurants in Japan
had been sustainably made available and supplied by Indonesian suppliers.
Blockchain’s distributed ledgers provide easy access to certify that the supply
process is in line to the established standards. All these applications of
blockchain technology would ease up the process of leading the world to a
sharing economy by eliminating intermediaries and generating real value for all
participants.

 

No matter what the
context, the impact of Blockchain is still at infancy. Experts are of the
opinion that, in terms of development, Blockchain is currently in the position
where the internet was in 20 years ago. It will take decades for blockchain technology
to adapt into the social and economic mechanisms of the world. Currently, it is
recorded that only 0.5% of the world’s population has adapted Blockchain.
Therefore, continuous development and a good template to adaption is vital to
speed up the pace of implementation of Blockchain as a primary technology. It
is certain that the Blockchain will create new foundations for our social and
economic infrastructure. But the very big question is when. 

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