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Block Chain Technology

Topics Covered:

  1. Awareness in the fields of IT, Space, Computers, robotics, nano-technology.

 

Block Chain Technology

 

What to study?

For Prelims and Mains: Blockchain technology- what is it? How it operates? Concerns and potential.

 

What are Blockchains?

Blockchains are a new data structure that is secure, cryptography-based, and distributed across a network.

The technology supports cryptocurrencies such as Bitcoin, and the transfer of any data or digital asset.

Spearheaded by Bitcoin, blockchains achieve consensus among distributed nodes, allowing the transfer of digital goods without the need for centralized authorisation of transactions.

 

How it operates?

  1. The technology allows transactions to be simultaneously anonymous and secure, peer-to-peer, instant and frictionless.
  2. It does this by distributing trust from powerful intermediaries to a large global network, which through mass collaboration, clever code and cryptography, enables a tamper-proof public ledger of every transaction that’s ever happened on the network.
  3. A block is the “current” part of a blockchain which records some or all of the recent transactions, and once completed, goes into the blockchain as permanent database. Each time a block gets completed, a new block is generated. Blocks are linked to each other (like a chain) in proper linear, chronological order with every block containing a hash of the previous block.

 

Benefits of blockchain technology:

  • As a public ledger system, blockchain records and validate each and every transaction made, which makes it secure and reliable.
  • All the transactions made are authorized by miners, which makes the transactions immutable and prevent it from the threat of hacking.
  • Blockchain technology discards the need of any third-party or central authority for peer-to-peer transactions.
  • It allows decentralization of the technology.

 

What real world problem does blockchain solve?

  • As of today nothing, but blockchain backers say it solves the problem of ‘trust’. Because the major cost of any transaction or exchange of services or goods is the act of verification — VISA charges fees to ensure that your card swipe is connected to your account or a property charges you for the effort of ensuring that you are entering into a genuine transaction — blockchain asks you to trust the energy-intensive nature of mathematical problems and have them masquerade them as ‘locks’ to secure your money, confidential documents or any kind of information.
  • While blockchain has the aura of transparency — anybody supposedly can check the history of a ‘block’ — it is at its core impervious to common sense. However, just as the inability to grasp in a visceral sense how letters typed on a mobile phone transform and make their way into another phone instantaneously a continent away does not stop people from using WhatsApp, blockchain technology has created enough hype and drama to have drawn the world’s wealthiest to invest in it and inveigle it into ordinary lives.

 

How blockchain can be used in public administration?

Blockchain has the potential to optimize the delivery of public services, further India’s fight against corruption, and create considerable value for its citizens.

  1. By maintaining an immutable and chronologically ordered record of all actions and files (“blocks”) linked together (“chain”) in a distributed and decentralized database, Blockchain creates an efficient and cost-effective database that is virtually tamper-proof. By doing so, blockchain promises to create more transparent, accountable, and efficient governments.
  2. In addition to creating a more efficient government, blockchain can also help create a more honest government. A public blockchain, like the one Bitcoin uses, records all information and transactions on the decentralized database permanently, publicly, and most importantly, securely. By allowing governments to track the movement of government funds, blockchain can hold state and local actors accountable for any misappropriations.
  3. Blockchain not only deters corruption through accountability, but it can also do so by bypassing the middleman entirely. Earlier this year, the World Food Programme began testing blockchain-based food and cash transactions in Pakistan’s Sindh province. Refugees in Jordan’s Azraq camp are now using the same technology, in conjunction with biometric registration data for authentication, to pay for food.
  4. With Aadhaar cards becoming nearly ubiquitous in India, adopting blockchain could be the next logical step in India’s pursuit of becoming a digital economy. Blockchain can play an important role in storing individuals’ data, helping conduct secure transactions, maintaining a permanent and private identity record, and turning India into a digital society.

 

Way ahead:

Technology has always proved to be disruptive, creating new opportunities and jobs and destroying old ones. If blockchain’s appeal lies in its appeal to destroy intermediaries — banks, courts, lawyers — it is unlikely to be smooth sailing. Moreover, there is already serious theorising by economists that shows how blockchain has its own vulnerabilities and susceptibility to creating new hegemons, power networks, cartels and challenges to global energy consumption.

 

Sources: the Hindu.

 

Mains Question: What do you understand by blockchain technology? Evaluate its prospects and challenges.