Blockchain In 7 Minutes | What Is Blockchain | Blockchain Explained|How Blockchain Works [Video]
Video uploaded by Simplilearn on February 27, 2019
What is Blockchain and could it really reverse the course of civilization?
It’s pretty easy to imagine arguments coming true, but it can be hard to understand what Blockchain is, and why its implementation could upend the world’s most powerful companies. Here is our answer to that:
Since the days of clay tablets, people have recorded the exchange of goods and services. As we’ve evolved in the digital age, recording these transactions has become much more complex, whether it is the exchange of money between two parties, documenting how goods move through a supply chain or making a contractual agreement.
The growth of global commerce and trade has created a network of desperate ledger systems that are vulnerable to errors, fraud and misinterpretation.
Take the diamond industry, for example. The journey of a diamond from mine to consumer covers a complex landscape of legal, regulatory, financial, manufacturing and commercial practices. Current supply change has to rely on intermediaries every step of the way; from government officials, to lawyers, accountants and banks. This adds time and costs. Diamond smuggling and frauds can tamper governments from collecting fair export taxes and consumers and retailers face the prospect of purchasing counterfeit or unethically mined stones. This is where hyper ledger blockchain technology comes in. It has the potential to eliminate these vulnerabilities with transparent transactions. Blockchain offers all parties involved in a business network a secure and synchronized record of transactions.
The blockchain ledger records every sequence of transactions from beginning to end, whether it’s hundreds of steps in a supply chain or a single online payment. As each transaction occurs, it’s put into a block. Each block is connected to the one before and after the groups of transactions are blocked together, a fingerprint of each block is added to the next, thus creating an irreversible change. That’s why blockchain is ideal for recording the mining, refining and distribution of one of the most valuable goods in the world. It can trace a diamond path from the mine to the hand of the consumer with exceptional security and transparency.
While blockchain works with all types of transactions, there are three key features that make hyper ledger blockchain uniquely capable to handle the requirements of a regulated industry like diamonds. It’s distributed, it’s permissioned, and it’s secure. Because the ledger is distributed, it works as a shared form of record-keeping, ensuring no one person or organization holds ownership of the system. As the diamond cycles through its supply chain, everyone involved during the process is permissioned to have a copy of every record and piece of data, and no transaction can be added to the chain without consensus across the participants. This means, no one person can add to or alter the blockchain without being permanently recorded. This makes it tamper resistant and highly secure, eliminating the risk of fraud and error. No one, not even a system administrator can delete it.
In the case of diamonds, a blockchain ledger keeps a record of high resolution photos of each diamond and every touchpoint along its journey. It holds certificates of authenticity, real time records of every payment transaction, as well as product details like cut, clarity, carat and diamond serial numbers. At the end of the buying cycle, there is a complete auditable and indisputable record of information. Blockchain technology gives us the ability to transform industries of all sorts, from diamonds to flowers, monetary transactions, or even things like contracts, deeds, records and other public and private agreements. It frees up capital flows, speeds up every process, lowers transaction costs and, most importantly, provides security and trust. We believe that blockchain will do for business, what the Internet did for communication: create new ways of working and opens more time for creativity and innovation.
All the above said, confirms that blockchain technology represents the second generation of the Internet, because this technology allows the Internet to evolve from an Internet of information, to an Internet of value. Blockchain can really disempower banks, make the energy grid far more efficient, fix many industries and even save journalism.
Why, you may ask? Because many companies make money by sitting in the middle of transactions between consumers and products, and Blockchain will change the equation for a lot of those industries. In fact, the new system will disrupt business models, whether they are long-term businesses, or only 4 or 5 years old.
For example, according to zdnet.com, banks have a lot to lose from Blockchain removing them as intermediaries, because they make a hefty profit from controlling the flow of currency throughout the world. In the near future, Blockchain-powered transactions will require different levels of engagement from the customer. For a payment, all that’s needed is data on whether the customer has the currency to pay. For a mortgage, the customer will have to provide additional data about income, assets, financial transaction history, etc. Banks are unlikely to go away completely, but they will have to migrate toward more value-producing activities than moving money around.
In conclusion, let’s admit that with Blockchain, the opportunity to re-engineer the economic power grid is enormous. We have to consider the fact that this new technology could rewrite some of the rules of capitalism, which naturally favors concentrations of wealth.