Blockchain, Bitcoins & Virtual Currencies – Technology, Opportunities and Threats
Blockchain is a cryptographic platform that is taking the world of FinTech by a storm. It started through the digital currency bitcoin. Bitcoin and digital currencies are based on a idea of a distributed trust mechanism . This is a way of keeping track of trusted transactions in a distributed fashion. This way is the Blockchain. Blockchains can solve the problems of trust, verifiability and accountability for transactions.
Each coin is associated with its current owner’s public ECDSA key. When bitcoins are send a message (transaction), sign with senders private key is transmitted. The new owner’s public key is part of message with these amount of coins. This transaction gets broadcasted to bitcoin network. So every node has information of transaction. The complete record of transaction is present in a block which changes every 10 minutes. (for bitcoin). To make generation of bitcoins difficult hashcash function is used. Each block contains a group of transactions that have been sent since the previous block. So unless all blocks from all nodes in world till genesis block form a chain to protect the data. All blocks distributed across world store complete information. To hack this system, a hacker has to hack in all the blocks from genesys block and spread all across the world. The time duration of 1o minutes is avaialble for this activity. After 10 minutes new block gets created. So the system protects the data and transactions.
The Blockchain technology has received tremendous attention over the last couple of years. Bitcoin system has more horsepower than all super-computers of the world put together. This is due computational power of a decentralized P2P network of nodes. These Nodes talk to each other on internet. Any of the nodes going down does not effect the Blockchain or its integratory. The blockchain can work with a single node, all other nodes be down or compromised.
Blockchain are of two type the public for Bitcoins and private for most of use cases. Public block chains also can exist for Bitcoin alternates. Private Blockchain is owned by a corporation, government body, or group of private people. It may be propreitary to a academic institue or a NGO.
Blockchain use cases (private blockchains) include:
1. Authentication and verification of all types of electronic records. This include academic records, identification documents, KYC etc. This is most important use case. These can are : (Currently not exisiting in India)
a. Insurance regulatory body (like IRDA in India) creates a blockchain . All insurance companies have a node installed. Now the problem of fake insurance policies have a killer solution.
b. Citizen data stored on node of blockchan. This will private blockchain with all states, select ministries having nodes.
c. Banks, Share depositories create block chains to store information. Again group of Banks or Share depositories with there associate companies create private blockchain.
2. Money transfer and electronic payment systems :
Payment gateway system backed by block chains for authentication . A payment gateway server is central server secured by firewalls, IDS and more. With block chain there will no more be central server as block chain is mesh of many nodes.
3. Virtual currencies
Somewhat similiar to bitcoin for study or other use cases.
4. Digital asset management :
Read world economic forum report Here.
5. Issue and trading of securities such as shares, debentures etc.
Use case explained in item 1. All records like land records lie safe.
6. Smart contracts : Please check its wikipedia page
Rohas Nagpal of Asian School of Cyber Law delivered a seminar where he covered.
1. The mathematics and technology behind the blockchain.
2. Global impact of virtual currencies.
3. Blockchain use cases.
4. Demonstration of an operational crypto currency and private Blockchain.
We have attached slides of these sessions for your perusal. We can also organise POCs, workshops and trainings for interested parties.