Defining blockchain basics and why it’s important

Blockchain Fundamentals

Many people confuse blockchain technology with cryptocurrencies like Bitcoin. It’s an easy mistake to make so let’s distinguish between the two. Think of blockchain as the operating system providing the means to record and store transactions while Bitcoin is a digital security tracked on the application using blockchain technology.
Blockchain technology is economical and efficient because it eliminates duplication of effort and reduces the need for intermediaries. It uses consensus models to validate information, which makes it less vulnerable. Transactions are secure, authenticated, and verifiable and the transaction record can be shared.


The four main concepts of blockchain

Shared Ledger
With a shared ledger, records are only stored once, eliminating duplication of efforts. It is the single source of truth. As an example, it is the ability to link a shareholder’s record with all its transactions vs. needing to duplicate the shareholder’s record for each stock transaction.

Authorized Users
The ledger can be shared among authorized members/users in a network. Additionally, users can be given full or limited access, allowing organizations to comply with data protection regulations.

Smart Contract
A smart contract is a set of rules governing a transaction—for example, a vesting schedule for a stock award.

Consensus
Where users are known and trusted, transactions can be verified and committed to the ledger through agreement.


Why is blockchain technology important?

Transaction history
It allows for a cumulative history of all transactions. For example, an organization will be able to track the “genealogy of a share.” Users will be able to see the origin of the share and how and when it transferred/adjusted. Even errors and corrections will be visual to authorized users, and nothing can be overwritten or deleted. Each transaction/adjustment is a new block, which is part of the chain.

Accuracy
Transactions are verified against settings or rules before it is committed to the ledger.

Time-saving
Complex transactions can be reduced from days to minutes. For example, if a company is transferred shares in a “many-to-one” transactions (150 employees selling their shares to one new shareholder), the blockchain can track the transfer in an efficient and auditable manner.

Cost-saving
Duplication of effort is eliminated because all users, including auditors, have access to one shared ledger.

Tighter security
Blockchain’s security protects against fraud and cybercrime. It allows for a members-only network with proof that the members are who they say they are. Plus, each new transaction is encrypted and linked to the previous transaction with a mathematical number ID that is impossible to alter once formed.

Enhanced privacy
With the use of IDs and authorizations, users can indicate which transactions or level of details they want other users to see or edit.

Improved audit capability
A shared ledger serves as a single source of truth and improves the ability to review and audit each transaction back to its origin.


What about private blockchain?

Private blockchains are more specifically known as permissioned blockchains. A private blockchain is a special type of blockchain technology where only a single organization has authority over the network. So, it means it isn’t open for the public to join in. Private blockchains empower full privacy, stability and high efficiency.

Examples of private blockchain

De Beers has launched a ‘secure and immutable trail’ using a private blockchain called Tracr, to verify the authenticity and provenance of diamonds and ensure they are not “blood diamonds” from conflict zones. 

Comcast has partnered with other industry leaders to launch Blockgraph, a blockchain-based system that allows advertisers to target viewers with specific adverts while maintaining viewers’ privacy.

Astrella uses private blockchain to track the genealogy of a share. By utilizing private blockchain technology, Astrella allows issuers to manage and track the ownership history (the genealogy) of each share from the time they are issued until exit. Visualizations showing the change in ownership can, with proper credentials, be shown either on a browser, a mobile device or a printed copy using a QR code.

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