June 6: In recent times, blockchain has been a topic of discussion all over the world. Ever since the era of cryptocurrency has started, blockchain has come into more limelight, because cryptocurrency works on the technology of blockchain. As the use of cryptocurrency or NFT (Non-Fungible Tokens) is increasing all over the world, the importance of blockchain technology is also increasing. Blockchain technology has now started affecting the life of the common man as well. Many of the services we use in our daily lives may be based on blockchain technology, but we are not aware of it. In such a situation, it is important to know what is blockchain in today’s time and how our life is connected to it.
What is blockchain?
We can call blockchain a chain of different blocks, information is hidden in these blocks. The purpose of using blockchain is to fix digital documents at a specific time (time stamp) so that it is not possible to backdate or tamper with them. Blockchain technology can also relieve us from the problem of two records without using a central server.
Using blockchain technology, money, property, agreements etc. can be easily exchanged without the need for mediation of a bank, government or any third party. The specialty of this technology is that once any data is recorded inside a blockchain, it becomes not only difficult but almost impossible to change it.
Understand what is blockchain with a simple example?
Suppose you are shopping in a mall. As soon as you go to pay for your purchase at the counter, you come to know that your debit or credit card is not working. You get a notification that due to a server problem in your bank, no customer of that bank including you can use their card. What will you do then? Obviously, if you ever get stuck in such a situation, you will be in trouble.
Now consider another aspect. Suppose the mall where you are shopping has access to some data or ledger that can update every transaction made from your debit and credit cards whether the server of that bank is working or not. If this happens, then you will be able to use your cards even if your bank’s server is down. Because, the mall will update the amount of your purchase in its data and when your bank’s server is fixed, it will be updated there as well. In such a situation, you will be able to shop even if the server is down without any problem. This is blockchain technology.
The example of blockchain that we use?
Most of us have used Google Spreadsheet at some time or the other. If we think about it, we will find that the Google spreadsheet we are using is a document or ledger that can be shared on every computer in the world and is connected to the Internet. If we make any change in this spreadsheet, it gets recorded in one of its rows.
Any person using a mobile device or computer can connect to this spreadsheet through the Internet and access its data. Anyone connected to the Internet can see the data entered in this spreadsheet but cannot change the data already present in it. Basically, this is blockchain technology. The only difference is that while spreadsheets have data in different rows, blockchain stores data in different blocks.
In such a situation, we can conclude that a block of blockchain is a collection of information in which data or information is collected in many small blocks and added one after the other in a chronological manner. When many blocks are connected to each other, a chain is formed, then this is called blockchain.
What is the relationship between blockchain and bitcoin?
Cryptocurrencies around the world, whether it is bitcoin or Ethereum, all use blockchain technology. The first and most famous application based on blockchain is bitcoin, which is the world’s most famous peer-to-peer digital currency. Bitcoin is created and controlled on the technology of blockchain. Unlike traditional currency, you can transfer bitcoin based on blockchain technology to anyone and anywhere without taking permission from banks or governments.
Digital currency based on blockchain technology, cryptocurrency like bitcoin or Ethereum does not care whether you are a human or a machine in the transaction. Based on blockchain technology, thousands of bitcoins are able to verify the validity of the payment equally at the same time, so there is no need for banks or any third party intermediary for its operation.
Blocks in Bitcoin’s blockchain are added every 10 minutes after being verified by cryptominers with the help of an inbuilt consensus mechanism. Each entry in these blocks is secured using cryptographic maths which makes it immutable.
What will be the role of blockchain in the launch of RBI’s Digital Rupee?
Let us tell you that India’s Finance Minister Nirmala Sitharaman had announced during the budget speech of the year 2022 that the government will develop a central bank digital currency (CBDC) in the coming financial year. The CBDC that the Reserve Bank of India will launch will be based on blockchain technology like any other cryptocurrency like Bitcoin or Ethereum. CBDC or digital currency will be a legal tender issued in digital form by the RBI.
What is the bad side of blockchain?
The basic problem of blockchain technology is to control it. Any central bank has complete control over the digital currency because the nature of blockchain is decentralized. In such a situation, if RBI comes up with a digital currency in the future, then it will be interesting to see what method it adopts to maintain its privacy and monitor it. If RBI keeps its control over the data of this digital currency, then CBDC, despite being a digital currency, is similar to the basic nature of NFT.
