Blockchain was invented by a Japanese man called Satoshi Nakamoto in the year 2008 to serve as a means of public transaction ledger for bitcoin; a type of cryptocurrency. The purpose of developing blockchain as a ledger of the bitcoin cryptocurrency is to eliminate the problem of double spending without the need of a central server or trusted authority.
Understanding the Blockchain Platform
A blockchain consists of a growing list of records that are usually called blocks, linked together using cryptography. With each block containing a cryptographic hash of the previous data. All transactions carried out on the blockchain platform are immutable; that is all data on the blockchain cannot be modified. It is an open distributed ledger that is designed to enable peer-to-peer transactions between two people on the platform. Transactions carried on blockchain are permanent and verifiable through a network that adheres to inter-node communication that validate new blocks.
Types of Blockchains
There are three types of blockchain platforms;
- Public Blockchains: Public blockchain has no access restrictions as anybody with an internet connection can send and receive transactionsand as well become a validator in the process. Examples of this type of blockchain include Ethereum, and Bitcoin.
- Private Blockchains:This type of blockchain is not open as a permission needs to be granted by the network administrators. Validator and participant access is restricted under this type of blockchain. Private blockchains are usually used by companies that are interested in the blockchain technology but are not comfortable with the level of control offered by public networks. They need the blockchain for computing, and accounting without being vulnerable to exposing sensitive data to the public internet.
- Consortium Blockchains:A consortium blockchain is a semi-decentralized platform, it requires a permission as well to be on this blockchain with each company on it operating a node on the network. The network administrators of a consortium blockchain restricts users reading rights as they deem it fit by allowing only few trusted nodes to successfully execute a consensus protocol on the network.
Advantages of Blockchain
- It Allows Transparency:Transactions carried out on blockchain is open for everyone to see as all persons on the network share the same documentation.
- Easy Traceability: The historic transaction on the blockchain platform can be easily traced to verify the authenticity of assets through the hash ID. This will help to limit the rate of fraudulent acts in the sending and receiving of payment.
- Improved Security: It is difficult for hackers to alter the records of data and transactions on blockchain as transaction records are stored across a network of computers rather than having the information stored on a single server.
- Low Transaction fee: Transactions carried out on blockchain has very low transaction fee as it has eliminated the need for a middle or third partner being involved in the transaction.
- Increase Speed and Efficiency: Transactions done on blockchain are faster and efficiently completed since it involves the use of a single ledger that is shared among individuals on the platform.
Blockchain will revolutionize the way transactions are carried out as it will finally eliminate the need for a broker or third party in sending and receiving payments between people across the globe.