JOIN USCryptocurrencies, blockchain & beyond
Advancement in encryption and network computing has led to new technologies which are driving transformational change in the global economy, including in how goods, services and assets are exchanged.
The advent of cryptocurrencies is one such important emergence in this process. A cryptocurrency is a medium of exchange like normal currencies such as rupee, but designed for exchanging digital information through a process made possible by certain principles of cryptography. Cryptography is used to secure the transactions, and to control the creation of new coins.
Cryptocurrencies can be used to facilitate peer-to-peer exchange bypassing traditional central clearinghouses. The potential benefits offered by cryptocurrencies, includes greater speed and efficiency in making payments and transfers, especially, across far-flung areas where traditional banking has not made inroads, hence, ultimately promoting financial inclusion. The distributed ledger technology emphasising that cryptocurrencies are unconventional decentralised means of keeping track of transactions in a large network — offering potential benefits that go far beyond cryptocurrencies themselves.
Understanding blockchain
A blockchain is a ledger of records arranged in data batches called blocks that use cryptographic validation to link themselves together. Put simply, each block references and identifies the previous block by a hashing function, forming an unbroken chain, hence the name.
Put like this, a blockchain is a kind of database with built-in validation. However, the clever bit is that the ledger is not stored in a master location or managed by anybody. Instead, it is distributed, existing on multiple computers at the same time in such a way that anybody with an interest can maintain a copy of it. The block validation system ensures that nobody can tamper with the records. Rather, old transactions are preserved forever and new transactions are added to the ledger irreversibly. Anyone on the network can check the ledger and see the same transaction history as everyone else.
Tracking IDs
The industry interest in blockchain has bombarded the cryptocurrency world; consequently, all large banks around the world have begun tacking the technology behind blockchain. Though this trend has been riddled with scepticism, the cryptocurrency creators are engaging themselves with blockchain by creating new forms and crafting new apps. This can be best exemplified with the work of some innovators, including I/O Digital, Ascribe and ShoCard — which are working with the blockchain to create new technological tools in identity management. I/O Digital is building an identity-management platform based on the blockchain. Also, ShoCard has developed a unique card, and the goal of this card is to impart a new way to verify the person’s identity with respect to certain special transactions, which require additional verification, other than just a credit card number.
When it comes to non-profit benefits — Ascribe partnered with Creative Commons to create a method for content creators, to essentially stamp their work with proprietary information.
Peer-to-peer transactions
Cryptocurrency transactions are sent from and to electronic wallets, and are digitally signed for security. Only the records of transactions between different addresses, with balances that increase and decrease, are available. Every transaction is stored in a vast public ledger called the blockchain. A typical peer-to-peer transaction can be understood in following points:
nIf “X” sends some crypto currency to “Y”, that transaction will have three pieces of information:
An input. This is a record of which bitcoin address was used to send the bitcoins to “X” in the first place (received them from “A”).
An amount. This is an amount of bitcoins that “X” is sending to “Y”.
An output. This is “Y” bitcoin address.
nTo send bitcoins (a kind of cryptocurrency), essentialities needed are a bitcoin address and a private key. A bitcoin address is generated randomly, and is simply a sequence of letters and numbers. The private key is another sequence of letters and numbers, but unlike the bitcoin address, this is kept secret.
nFor the file sharing, an in-house side-chain is used to offer a company a secure, cost-effective method, for storing and sharing information between devices. Even when the current implementations are not very practical for this purpose, the peer-to-peer file-sharing remains an attractive prospect for emerging technology.
Record maintenance
In recent times, cryptocurrencies and blockchain have been the biggest revolution to hit the finance industry. The twist this duo has got is remodeling the brands and using the creative intellectual property (IP). IP is stated to the ideas, which are created by the human mind. Now when the economy is turning creative and informative, IP has turned out to be a precious commodity with strong incentives to approve and enforce ownership. As with more tangible types of property, rights also exist for IP.
When it comes to blockchain, it is capable to create an indelible record of cryptocurrency transaction and provide an indisputable record of registered IP, whether they be patents, trademarks or copyrights. The open nature of the blockchain enables the registration visible to all making the new registrations and helps in their easy submitting — with little reliance on larger organisations. An Indie music artist created history by releasing and selling his music directly to fans without the major costs associated with platforms akin to iTunes or Spotify. A day might come when they can independently publish their work — thanks to the blockchain’s ability to copyright, distribute, and license musical releases faster, and cheaper, than ever before.
Way of payments
Distributed ledger technology is not just limited to traditional financial services; it is creating new opportunities in other arenas as well. Today, there is an app Abra, a blockchain-based digital wallet aiding people to initially store digital cash on their smartphones and then sending it to someone else’s phone, across the street or a continent away — essentially turning people into human ATMs.
There is another app too, Slock.it — helping people to disintermediate third parties from a transaction. Building atop Ethereum blockchain, Slock enables owners to rent their property or assets directly to users based on a smart lock. The lock gets activated as soon as the renter deposits money and the owner here retains the control by using a smartphone.
Control
Another potential Blockchain-based benefit is BitNation — helping Syrian refugees in migrating across countries. The company’s emergency digital ID provides refugees with a way to identify and authenticate themselves. Refugees are also provided a Bitcoin-based Visa card, which allows them to receive money sent to them during their journey. This helps government to keep a track on not just the people, but also on the transactions done by them, as this way, government has control over the identities.
If the records are part of the systematic blockchain ledger, it will eventually help government to keep track of all the legal and illegal transactions made during any kind of national and international trade — enabling better control.
(The author is Managing Director of CyberPlat India. CyberPlat is a provider of integrated payment processing services in India, Germany, Austria, Russia and CIS countries.)