- Md. Manjur Hossain
One of the most talked about topics nowadays is ‘blockchain’, a trendy technology in financial service industry. This technology, if completely adopted, will facilitate banks to process payments quicker and more accurately while plummeting transaction processing costs and the requirement for exceptions. However, banks need to build a necessary infrastructure to operate a true global network with solutions based on this transformative technology.
But things are not that easy because many of the people especially the financial service providers don’t have much command over this new tech ‘blockchain’. Blockchain literally is a record of transactions made through bitcoin or other cryptocurrency maintained diagonally several computers that are linked in a peer-to-peer network. So it is the prerequisite for the bankers to gather perfect knowledge on it.
How Blockchain works
Blockchain technology, as it has been said earlier, powers and supports the digital currency space. Many analysts believe that it contains frequent viable applications and uses beyond cryptocurrencies also. Blockchain can actually be thought of as the combination of several different existing technologies and when those technologies aren’t new, the three gears of this technology need to be learnt. Private Key cryptography, distributed networks and process of record are the major components to go with blockchain.
Private Key Cryptography
Illustrating the technology of private cryptographic keys helps envision two individuals who crave to perform a transaction online. Each of the individuals, according to Investopedia, holds two keys: one of these is private and one is public. By combining the public and private keys, this aspect of cryptography allows individuals to generate a secure digital identity reference point. This secure identity is a major component of blockchain technology. Together, a public and a private key create a digital signature, which is a useful tool for certifying and controlling ownership.
The digital signature of the cryptography element needs to be combined with the distributed network technology component when Blockchain technology acts as a large network of individuals who work as validators to reach a consensus regarding transactions. This process will be certified by mathematical verification and used to secure the network. After its combination of the usage of cryptographic keys with a distributed network, blockchain allows for new digital interactions.
Process of Record
Process of record is actually a media of accounting for the transactions related to the network and the most important fact of this technology is the way that it confirms and validates transactions. When two individuals incline to conduct a transaction online, each with a private and a public key, blockchain allows the first person to use their private key to attach information regarding the transaction to the public key of the second person. In an article titled ‘How Does Blockchain Work?’ published in Investopedia, it is said that the information together forms part of a block, which contains a digital signature as well as a timestamp and other relevant information about the transaction, but not the identities of the individuals involved in that transaction. That block is then transmitted across the blockchain network to all of the nodes, or other component parts of the network, which will then act as validators for the transaction. It may seem, in practical terms, unrealistic to expect millions of computers around the world to all be willing to dedicate computing power and other resources to this endeavor but the solution to this matter could be the blockchain network called mining which is related to economic issue traditionally. Just put simply, this concept summarizes a situation in which individuals who each act independently in their own self interests tend to behave in ways contrary to the common good of all users as a result of depleting a resource through their action at a collective level.
Although, it is not perfectly known the best use of blockchain’s powerful capabilities, the continuation of its experiment will unveil new ways of utilizing blockchain for a variety of different purposes In fact, it’s all about networking. When a businessman can link the system with other through technology in a secure way, new technology related to banking can be easier and interesting.
The author is a Company Secretary of NRB Global Bank