The growing list of records is called blocks and are linked using cryptography and it is decentralized and digitize the cryptography transaction and which uses digital ledger technology. And this grows up as a complete block and then these are added and recorded in a chronological order, which usually helps to keep a track on the digital currency transaction by the participants avoiding the process of keeping records. And every computer connected to the network gets the details of blockchain and automatically gets saved in the computer.
Bitcoin is another concept in blockchain which is the virtual currency for accounting methods, whereas the digital ledger technology that is being used by blockchain uses various commercial application nowadays. Using this technology it is very easy to digitize, code and insert any document into the blockchain as this is used only in digital currency to very the transactions. Which results in making the record which is everlasting and which is permanent. And the best thing about the blockchain is that the authenticity of the records is not mandatorily be verified by one centralized person it can be seen by everyone that is related to the blockchain.
All the transaction which are recent is kept and recorded in the form of a Block also known as “Current Block”. After it is checked it goes to the blockchain database permanently. A lot of countless blocks are present in a blockchain as everytime a block is completed another one new block is generated and all these blocks are linked in an order linearly or chronologically. Every new block generates will be having a hash of the previous one. The blockchain keeps all the backup and information regarding the addresses of the users and balance they are maintaining from the starting block to the most recent block.
The transactions done in blockchain are unchangeable and set and can’t be deleted, blockchain was designed in this only. To remain meddle-proof, cryptography is used to add the blocks so that data can’t be copied and can only be distributed. As the blockchain size is growing day by day a lot of problems are also being evolved like having the storage issues and synchronization issues.
BITCOIN AND BLOCKCHAIN
Bitcoins were developed by a group of people under the name Satoshi Nakamoto and are known as the crypto-currency or the digital payment system. Which means they can be used as the original currency but not in reality but in internet media. These are very similar to digital cash which can be used for anything online. These can only be used in the cloud platform like PayPal, Paytm or citrus. This cash may not be the real one and are virtual one but can be utilized as the physical cash in the internet platform and can be transferred to different people on the internet platform.
In the bitcoin network the direct transaction between users so it is also known as peer-to-peer network ignoring any mediator. And all these transactions are being verified by network nodes and saved in the distributor ledger called as a blockchain. As the whole system works without a central location to store data and single administrator and the first digital currency which was decentralized is called as bitcoin.
Unlike the normal currency, bitcoin is the unique currencies only can be used in internet medium and can’t be created on requirement as the original cash can be. Whenever a valid transaction is there in a block and added to the blockchain then the bitcoin is being generated. And only 21 million bitcoins can be created as the rest 17 million have already been created. A lot of backgrounds work like encryption, the mathematical algorithm is also involved in it so that the fake bitcoins can’t be generated.
PROBLEMS RELATED TO CURRENT BANKING SYSTEM
- Transaction Fees Are High: Suppose you want to send some $100 to your friend and the transaction must go on to the third parties which are the banks. A transaction fee of 2% which will be $2 will be deducted from the bank so, initially, your friend will get $98. This was the case of only $100 if suppose you are sending $100,000 then an amount of $2,000 will be deducted which is the big amount and the banks get a lot of profit.
- Spending Double: If a single token is used to spend twice or more then there is an error in the digital cash and this called as double-spending. It is done by falsifying or duplicating the digital transaction involved with the digital tokens. And one can complete this transaction without having the need for enough balance.
- Hacking The Accounts And Net Fraud: the number of account hacking and internet frauds have been increased in India. Statistics show that the fraud related to credit/debit card and internet banking where more than 14,824 out of which Rs 21 crore were as internet banking and Rs 41.26 crore where of ATM or debit card-related fraud.
- Financial Crisis: has this ever happen to you that you have given all your money to someone and that person gone lost after taking all of that. This was the situation happened back in years when banks and investment companies borrowed a huge amount and lent it as the subprime mortgage to people who after taking loans were not able to repay it. Which created a financial crisis or financial crash which created a huge loss of $11 trillion.
HOW TO SOLVE THESE PROBLEMS USING BLOCKCHAIN?
- System for decentralizing: the banks and investment organization are being monitored by the authorities of central or by the authorities of federal whereas the blockchain is being monitored the decentralized approach. For the growth and downfall, everyone will be equally responsible whoever is a part of this type of system. Similarly, everyone has the equal powers whoever is involved in this system.
- Public ledgers: all the details of the transaction that takes place in blockchain system are kept in the ledgers and can be easily accessible by anyone who is connected to the system. You can get all the transaction details since the initiation if you got connected to the blockchain network. As all the ledger can be assessed publicly, still the people and their transaction details are kept anonymous.
- Every single transaction is to be verified: the ledger are cross-checked and after few minutes the signal of validation transaction is sent only after the verification of every single transaction. Through this process, the problem of double spending can be eliminated by using the different complex encryption and hash algorithms.
- Low or No transaction fee: generally the transaction fee is not applicable but in certain variants of blockchain they charge some amount of transaction fee which is usually very less. However, the amount which is taken is comparatively very less than the financial and banking organization. And the minimal amount is taken to only when a transaction which is needed to be done in a priority then the transaction fee is required for verification of blockchain in priority.
BLOCKCHAIN FEATURES OR ASPECTS INVOLVED:
- Hash function SHA256: SHA256 is used as the hash algorithm in the blockchain technology. Hash is being used because the output should not be ‘encrypted’. Which means that the original text can’t be decrypted. Whatever may be the source text enter the size of the text would be fixed so initially called as a one-way cryptographic function.
- Cryptography for public key: a set of keys are being created using the cryptographic technique known as the public keys and private keys. Here the public key means which can be shared with other however private keys means which are kept by the users as a secret.
- Peer-to-peer network or distributed ledger: in the blockchain network every single person present in it would be getting a ledger copy there no centralized copy for one single person. Suppose if you want to send 10 bitcoins to your friend and your account has 900 bitcoins whereas your friend’s account has 40 bitcoins, then 10 bitcoins will be debited from your bitcoin balance and will be added or credited to your friend’s bitcoin balance.
- Work proof: people known as the miners in bitcoin network are used to verify the transaction and solve the difficult computational puzzles that come up in the blocks created. And it is needed to be solved in 10 minutes with an average difficulty level. And miners have to try about a lot of mathematical value to get that correct hash. If a miner successfully finds it then he can add the blocks to the blockchain.
- Validation of the incentives: the miners are given the rewards for creating the latest blocks and this is the final step in bitcoin technology. The rewards are being provided for validating the transaction and maintaining the blockchain system. Validation of incentives is the way to create the new currency and main aim is to mine all the 21 million bitcoins.