Blockchain Technology: A Disruptive Technology

The inter-ministerial committee on virtual currencies headed by Finance Secretary Subhash Chandra Garg has recommended for a ban on private cryptocurrencies.

On the same time the committee has identified the potential use cases for blockchain technology in areas such as payments systems including cross-border and small value payments; data identity management or know-your-customer requirements by various financial entities; insurance; collateral and ownership (including land) registries; loan issuance and tracking; e-stamping; trade financing; post-trade reporting; securities and commodities and internal systems of financial service providers.

What is Blockchain Technology?

Blockchain Technology is a platform which provides for a secure way to record transactions and circulate it among signatories, or any kind of target group with an Internet connection. It is basically an extremely democratic ledger that cannot be arbitrarily manipulated and easily shareable.

How does Blockchain Works?

• Every block in a blockchain is a record of transactions and the more the number of transactions, longer is the chain.
• The Blockchain technology provides for an unalterable document of the history of every transaction.
• There is minimal identifying information and every block is linked to a unique ‘digital signature’ of the transacting participants.
• Every block in the chain is distinguished from another through a unique code which is a string of numbers.
• The verifying roles in blockchain applications are outsourced to several computers on a network wherein each has the exact same copy of the block. These computers verify the genuineness of transaction by solving mathematical problems that can only be done in brute-force using energy-intensive ways that require a lot of computational power, and therefore electricity.
• This is a key reason why proponents of the blockchain technology vouch for the security of blockchain-backed transactions.

Can Blockchain Technology prove to be disruptive?

• In the current era of the digital world, trust issues have become a major concern.
• At present, the major cost for any transaction or exchange of services or goods is incurred on the act of verification. For example, VISA charges fees to ensure that your card swipe is connected to your account or a property charges you for the effort of ensuring that you are entering into a genuine transaction.
• This is where blockchain can prove to be a disruptive technology. The blockchain technology through the energy-intensive nature of mathematical problems functions as ‘locks’ to secure your money, confidential documents or any kind of information.
• Through these locks, blockchain promotes the aura of transparency wherein anybody supposedly can check the history of a ‘block’.

Technology has always proved to be disruptive. Technology creates new opportunities and jobs while destroying old ones. The blockchain’s appeal lies in its appeal to destroy intermediaries like banks but it is unlikely to be smooth sailing. There is already enough serious theorising by economists to shows how blockchain has its own vulnerabilities and susceptibility to creating new hegemons, power networks, cartels and challenges to global energy consumption.