BLOCK-CHAIN – what is it all about?

In recent times, we hear a lot about the role of block chain technology in various
business areas and we all know that block chain is going to make huge difference
and benefit in our day to day business.
Having said that, what is Block chain? What does it do? How does it works?
Let me try to answer them in simple terms with some examples.
The first thing to understand is Bitcoin and Block chain are not same.
Bit coin is a digital coin, and
Block chain is the technology which helps in the movement of the digital coin
from one individual to an another one.
What block chain tries to do? – the answer is Quick Money Transfer.
Let’s understand that with an example.
Say if “A” from India tries to transfer money to “B” in Germany. Generally, it is
carried out a by a third-party network after deducting some charges. This would
typically take about 2 days or more for the transaction to complete.
Now, what is Block chain trying to do here?
NO THIRD PARTY is involved & faster transaction process, basically immediately
with less deduction of charges.
How block chain does this?
Block chain uses the concept of Open/Public Ledger. Since it is open, anyone can
access block chain in the network and below is an example on how it works.
Say, there are three people A, B & C involved to transfer money to one another.
“A” initially has 200$ and transfers 100$ to “B “. This happens to be a transaction
and this transaction is linked to the past transactions as below.
 200$ 100$ 100$

A 100$ B

Open Ledger

A--- 200$

A--- B 100$

Assume that “B” wants to transfer 50$ to “C”. The same process takes places
where the transaction of “B” to “C” is linked up to the past transactions.
Open ledger/Block Chain is nothing but a chain of past transactions/blocks that
is open and public.
In other words: Block Chain is a list of continuously growing blocks, which are
linked and secured using cryptography.

200$ 100$ 100$

A 100$ B

Open Ledger
50
A--- 200$ $

A--- B 100$

C 50$
B--- C 50$
 What we can see so far is,
- where the money was,
- where the money is,
- how much each one has
Most importantly, in block chain all the participants in the network can participate
and decide whether a transaction is valid or not.
How the participants in the network decide whether the transaction is valid or
not?
Say now A attempts to transfers 150$ to C.

200$ 100$ 50$

A 100$ B

Open Ledger
50
A--- 200$ $
150
$
A--- B 100$

B--- C 50$
C 50$

Participants in the network can see it’s not a valid transaction because, A is
eligible to transfer only 100$ and hence this transaction is not added to the open
ledger and it is not part of the chain.
Secondly, the ledger is distributed across the nodes in the network.
Meaning, all the nodes in the network has the copy of the ledger. And anyone
who participates in the network will also have the copy of the ledger.
Since the ledger is de-centralized, how does the synchronization happens
between them?
All the nodes in the network should have the same copy of the ledger and this is
achieved by the principle of block chain.
When a transaction happens, every participant in the node will get to know that
there is a transaction which is not validated and added to the ledger.
To add the transaction to the ledger, miners play a major role. Miners are special
nodes. Miners will compete within themselves to be the first one to validate the
transaction and add them to the ledger.
What does Miners do? Miners does two things: Validate the new transaction and
find a special key to obtain the previous transaction and lock them with the new
transaction. To find the right key, the miners needs to invest high computation
power and time.
The miner who does this first and if majority of the other miners accepts to it, is
rewarded with BITCOIN.

Miners
A 100$ B

50
$

C 50$
Once this is done, the ledger publishes the solution to the entire network and the
other miners just adds up the validated transaction with no rewards. This process
is carried for every transaction.