Blockchain A forward step to secure transaction
What is Blockchain
Security is paramount in financial transactions. Software outsourcing companies have witnessed that cyber breaches are advancing at a higher rate than technology advancements. Blockchain is seen as the next big thing for safe and secure financial transactions. Blockchain is known as a backbone technology of bitcoin, a digital currency revolution. Blockchain allows making and verifying transactions on a network instantaneously without any central authority.
Blockchain is a data structure that maintains a growing list of records called blocks and each block contains a link to a previous block similar to Linked-list and a timestamp thus creating a digital ledger. Blocks are secured from revision and tampering. Cryptography is used to allow each participant on the network for ledger manipulation in a secured way without any help from a central authority.
A blockchain comprises blocks that maintain batches of valid transactions. Each block includes the hash of the preceding block in the blockchain, linking the two. The following diagram shows an overview of Blockchain technology and architecture.
Blockchain not only provides a way for the secure transaction but also makes it easy to recover corrupt data as every node inside a blockchain has a copy of data/block. Data loss chances are also minimal as every node has a copy of data. Blockchain is a technology that can be integrated into multiple areas. Some of the areas where Blockchain is useful are payment system and digital currency, cryptocurrency, permission distribution like the distributed voting system, and share power of the voting system.
Security feature in blockchain
There is no centralized “official” block copy that exists. If any person wants to change its own database copy, it will be reflected until it is verified by the verifier. This reduces the chances of hacking or security breaches.
Blockchain uses public key and private for encryption. Private key is known only to the user and it is not stored anywhere. During transaction, only scriptpubkey is shared. Scriptpubkey contains a public key and network address in an encrypted format. So the sender does not know about public key and network address making it a highly secured way of transaction compared to other technologies. Following diagram depicts the transaction flow.
Workflow Of Blockchain
Let us understand how blockchain technology works with an example. Person A wants to send some bitcoin (digital currency) to person B. Person A requires wallet account and also should know digital address of Person B. Following are the steps involved in this transaction.
Step 1: Person A initiates a transaction and includes digital signature inside a transaction
Step 2: Transaction is sent to the miner. Miner is one type of verifier that verifies all transaction of connected nodes
Step 3: Miner broadcasts the transaction as a block to all connected nodes if the transaction is valid
Step 4: Node inside the network accepts block if all transactions inside it are valid and not already spent. After ownership of block inside network and transaction is transferred into target account inside the block is sent to person B
Step 5: Person B gets money (digital currency)
Disadvantages of Blockchain
There is a tradeoff for using Blockchain technology. It does offer additional security however one should consider the following disadvantages.
- Blockchain requires more storage space as it stores all transactions.
- Complete transaction takes more time compared to other technologies as the transaction verification process is longer and we are dependent on Miner for verification. On verification by Miner, the transaction is broadcast to all node as Block
- This is comparatively costly technology. Miner charges per transaction for verification
Applications of Blockchain:
- Using Blockchain, one can make international payments and money transfers across different nations without any involvement of third party
- Blockchain is helpful in Capital Markets as it benefits in rapid clearings and settlement, consolidation, improvements in operations, etc.
- Blockchain has shattered the way of traditional businesses across the countries in which you were to generate high volumes of documentation with country and product details. It has overcome the hard financial management issue through speed transactions.
- Because of its immutable nature and following the continuous data verification process, it is highly useful for storing big data.
- Not just these, it is also helpful to different industry verticals such as Healthcare, Banking, Blockchain software development companies, Transportation and Logistics, etc.