A step-by-step process of blockchain:

By Samson Arman, King’s College London

Intro:

The term blockchain has been used more frequently over the last decade, but what does this mean?

Despite appearing as a concept only expert minds can comprehend, the theory behind a blockchain is quite manageable for anyone to understand, regardless of education level.

In a nutshell, blockchain is a new ledger technology created with the aim of decentralising trade, allowing users to make transactions more peer to peer instead of the customary use of intermediaries such as banks and third parties.

Benjamin Xie : “It creates a never-ending chain that continues on and on as long as there are active people using it”, lecturer at the EU business school.

How do blockchains work?

The multistep process of blockchain technology can be condensed into 5 steps shown below:

  1. Two parties, X and Y, decide to exchange a unit of value such as digital currency or assets etc, and commence a transaction.
  2. The transaction is packaged with other pending transactions thereby creating a ‘block’. The block is sent to the blockchain system’s network of participating computers.
  3. The participating computers evaluate the transactions and through mathematical calculations determines whether they are valid, based upon the prior agreed-upon rules. When consensus has been achieved, typically among 51% of participating computers, the transaction is complete and verified.
  4. Each verified block of transactions is time-stamped with a cryptographic hash. Each block also contains a reference to the previous block’s hash, thus creating a ‘chain’ of records that cannot be falsified except by convincing participating computers that the tampered data in one block and all prior blocks is true. This feat is considered impossible at the moment.
  5. The unit of value is moved from the account of party X to the account of party Y

Why is there growing popularity in Blockchains?

Blockchain is an immutable storage system, this means that data cannot be altered or deleted. If for instance there was an attempt to change the data all users would be made aware of this instantly.

Compared to traditional intermediaries, blockchain offers faster transaction times. For example, sending money overseas from centralized banks and companies, such as western union takes up to five business days. Whereas blockchain transfers can be down in a matter of seconds making this technology more ideal for consumers.

When you use traditional methods to transact some form of fee is required in exchange for their services. The fees incurred are generally small at the surface level, however, if the transaction requires multi-step processes, it can make the transaction a lot more expensive. On the other hand, blockchain offers a lower transaction fee on average.

Conclusion:

As technology continues to develop, blockchain will see a continuous steady rise in users that it is currently experiencing. It currently boasts a user count on blockchain wallet of 75.6 users per million a drastic increase from 0.01 per million in April 2012.

It is also estimated that the blockchain market is to accumulate $20 billion in revenue by 2024 and reduce 30% of banks infrastructure costs, according to techjury.

The future of transaction and trade is looking very decentralised as more users are opting to use blockchain.

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