2017 has seen the advent of Blockchain Technologies like Bitcoin and Ethereum. A lot of important financial sectors and some prominent figures round the world have shed some light on this new form of technology.
The value of these virtual currencies has increased rapidly. Prices of Bitcoin and Ethereum (a comparatively new form of this technology) have been seen to increase rapidly and then fall back slightly over the years. It is a new form of asset apart from stocks, mutual funds and bonds although certain analysts warn of a crash of crypto-currencies.
Bitcoin, Ethereum and Crypto-currencies, the terms explained:
Cryptocurrency is a virtual form of money that encrypts transaction. The process is carefully monitored using Blockchain. Since there is no central authority that controls it, it is theoretically immune to interference from the government.
Using a peer-to-peer network a list of data blocks is maintained since the technology of cryptocurrency is distributed over different databases in different locations.
Using cryptocurrency mining, new units of cryptocurrency are created and a check is made so as not to depreciate the existing units present in the market. Their prices are determined based on concepts of supply and demand; however certain restrictions are put as well.
The examples of different crypto-currencies are Bitcoin, Ethereum, Ripple, Litecoin and Dash.
Blockchain is the technology that develops these currencies and is responsible for their monitoring. Surprisingly, Blockchain is seen as a worthy investment as compared to the currencies themselves!
Blockchain is indeed very promising for its high quality encryption and monitoring. It also holds some other features, like its Durability and Robustness. In fact it has a built in robustness and durability functionality. It does not have a single point of failure because of its distributed nature. It is beyond failures from the part of humans or the system. The only form of failure has been due to hacking or human error. The underlying technology still holds strong. It works in the following way:
- There is a main register that records a transaction.
- A connected and distributed system of registers also records this transaction.
- The connected registers are secured and validated.
Also Blockchain checks its transaction every ten minute. This set of transaction is known as a “block”. This method ensures that data has not been corrupted and also data transparency. Altering any unit in the block would require high computing power that ensures security.
Because Blockchain technology has distributed data storage mechanisms, security of data is maintained. Blockchain uses encryption technology to secure data and prevent its malicious use and unwanted manipulation.
Blockchain cryptography uses “digital signatures” that provides verification is impossible to forge. Cryptography uses keys to secure this. With the help of “keys” a cipher text is created and is transferred to the receiver and then decrypted.
The Bitcoin currency is accessed by a number of users but this technology is really fault tolerant. This level of robustness is really difficult to get, considering its cost. The fault handling that Bitcoin can do is difficult to get from any other technology.
Though the anonymity of transaction promised by Bitcoin technology has its cons, certain data should definitely not be made public. Also certain companies would not want to expose transactions to their competitors. A public Blockchain technology is therefore not useful. Instead cryptographic hashes can be used to compare the values stored in the Blockchain to resolves conflicts and any possible disputes.
At this moment there is a significant boom in job opportunities for Blockchain developers. With its features, Blockchain technology has the potential of becoming the future of transaction. However, it faces a lot of resistance from the government and traditional finance sectors. Banks obviously fear monetary transactions shifting online, breaking traditions. Bills have been submitted stating that this form of technology would lead to corruption and cause terrorism in the future. The anonymity of Bitcoin transaction may lead to illegal activities like purchase of drugs or weapons or goods.
But then some of the major Bitcoin transactions have successfully happened in the past years. Most of the stock exchanges use Blockchain technology now. It is definitely worth a gamble considering their all time high price.
Author: Chirag Thumar, NEX Software.
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