Ever since BitCoin got all that hype, one term that has been heard a lot is “BlockChain”. Here is a summary for you explaining what it is, how it works, & how it can be used to help e-business – so that you don’t feel like you are in that high school Calculus class when you hear BlockChain again.
What is it?
BlockChain came into existence in 1991, – intended to timestamp digital documents so that it’s not possible to backdate them or to tamper with them – but it was first conceptualised by, a person or group of people known by the pseudonym, Satoshi Nakamoto for the purpose of BitCoin – BlockChain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Most business transactions need some kind of middlemen like banks, financial institutions etc., Blockchain process removes the need for a middlemen and connects the Suppliers and consumers directly.
It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. The invention of the blockchain for BitCoin made it the first digital currency to solve the spending problem without the need of a trusted authority or central server. The BitCoin design has been the inspiration for other applications.
Transaction records are created in a blockchain, but identifying information is encrypted and no personal information is shared. – BlockChain also ensure minimal to no chances of fraud since the block of transactions are continuously validated, it is not controlled my any single entity & has operated without any serious disruption since its inception in 2008.
How does it work – The BlockChain Process
It all starts with blocks or online records. As the name suggests block chain is a chain of blocks. Each block contains three elements – data, hash & the hash of the previous block. The first block is the only block that doesn’t have hash of the previous block, and is called the genesis block.
The data that is stored inside the block is the main information about the block – example in a BitCoin BlockChain – the Block data will consists – number of coins, who to pay & from whom.
The next element is a hash; a hash is basically how you encrypt your data, something like a fingerprint. The Hash identifies the block and all of it’s contain and is always unique. Although it is difficult to change the data inside the block but even if anything inside the block changes then the block hash also changes, and in this way it becomes easier to suspect a change.
The Hash of the Previous Block is what effectively creates a chain of blocks and is the main reason why the BlockChain Tech is so secure. Consider a chain of blocks with n number of blocks, each block has a hash and the hash of the previous block, in such a way that block n points to block n-1. Let’s say someone tempers with the second block – this will lead to a change in the second block hash and that will make block three and all the following block invalid.
BlockChain use in e-commerce in CryptoCurrency:
BlockChain is a highly robust technology eliminating the middlemen completely and thus will have a major role building the future of e-commerce and CryptoCurrency.
BlockChain provides a high transparency in the transaction since it removes the need for a third party or central authority to authenticate or process peer to peer transactions. The transactions can also be tracked accurately and timely. Any change can be easily tracked as well, and thus transparency is a major characteristic of BlockChain
The e-commerce industry faces a major challenge in the form of delays which may attribute to technicality, redundancy or to the fact that since e-commerce involves many parties, the transaction flowing through all of those parties creates delays. In case of BlockChain, there aren’t any intermediaries and each core transaction is processed only once, thus reducing delays.
BlockChain Tech can bring a lot of Cost Savings to e-Commerce. Apart from eliminating the middlemen costs, the tech can also help in completely eliminating costs paid to the payment gateways for processing online payments. Another way costs can be saved is by companies switching to paperless tech and abandoning physical paper trail.
BlockChain is a decentralised ledger. Since it is open, decentralized and distributed, it allows the market participants to keep track of digital currency transactions and thus removes the need for central recordkeeping. Decentralisation also helps in real time data mining, records verification thus reducing time to reconcile information.
The ledgers (online records) made are permanent records and cannot be altered easily. Since every block contains the hash of the previous block, tracking changes and subsequently tracking any possible fraud becomes easier.
BlockChain is the technical uprising that has the potential to completely metamorphosize the transaction and e-commerce system where every single transaction can be entered into and validated by anyone, anywhere easily. The transactions are encrypted, transparent and stored in distributed databases which are protected from loss, deletion and tampering.
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