The Future Prospect of Using Blockchain Technology for Securing Digital Transactions

Blockchain

Blockchain technology is a  distributed ledger used for recording transactions. Blockchain is decentralized and transparent. Blockchain maintains a list of records known as block. Each block contains a  hash of the previous block and transaction details. In Blockchain, transactions are recorded only once. No participants can change the transaction after it is been recorded in the ledger.

How Does Blockchain Work?

 Blockchain is also known as distributed ledger technology, blockchain works with the aim of digital information distribution where the transactions are recorded and cannot be edited. 

Data cannot be changed due to the hash function of the blockchain. The hash function is an algorithm that converts row input data into encrypted code representing original data. The function makes it difficult to decrypt hash as identifying the length of the input is difficult to decipher based on the output.

A new transaction is entered. Then the transaction is entered into a network of peer-to-peer computers. the network solves the equation to validate the transactions. Once the transaction is considered legal, the information is fed into a block.

When the block gets filled it gets chained, creating a chain of transactions. The transaction gets completed.

Blockchain-related terms

  • Node- Any computer running blockchain software is called node.
  • Miner- The miner is a participant in a blockchain that participates in securing the network and validating the new transactions.
  • Nonce- An arbitrary number that is used once.

Benefits of Blockchain technology

  • Enhance Security- Blockchain helps in preventing fraud and unauthorized activity through encryption it reduces risk of fraud.
  • Transparency- Blockchain uses distributed ledgers for recording transactions. All network participants access their data at any time which provides full transparency to the participants.
  • Increased efficiency and speed- Traditional paperwork are time-consuming and requires third party. Blockchain technology makes transaction process faster and more efficient.

Security in Blockchain and Applying it to Digital Transactions

Traditionally the security of transactions depends on the presence of trusted third parties, such as banks. In blockchain technology, it excludes the presence of third party which decreases the probability of security breaches. Blockchain has promising features for ensuring the security of digital transactions. However, blockchain cannot be applied to all transactions due to some drawbacks. Blockchain cannot be applied to time-sensitive systems, as it takes considerable time for a block accepted into the blockchain.

 Blockchain technology can give much quicker and less expensive options for cross-border payments. There might be a time when we can witness all business transactions being linked to blockchain technology.

Security features of Blockchain

  • Blockchain technology relies on ledger to keep all the transactions. If the ledger was compromised it could lead to a system breakdown. The ledgers in blockchain are decentralized which means no single system or computer has control over it. It is controlled by thousands of computers.
  • The ledger exists as a long chain of cryptographically encrypted blocks which increases the security of the system.
  • Due to complex mechanism, it is very difficult to commit a fraudulent transaction.

Related: Understanding Cryptocurrencies and how they work as a medium of exchange

Conclusion

Blockchain has become a technology with great potential to change our economy. The demand for blockchain technology is not likely to slow down, it will increase even more. The technology enhances the security and privacy of data and increases efficiency. It has the capability for securing transactions. So let time decide if there is limitless potential for blockchain technology or if there is nothing.

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