How blockchain works and the impact it could have on the world

yokesh12

posted on 2 years ago — updated on 1 second ago

299
views

Non-Fungible Tokens or NFT’s are digital assets that represent real-world objects like arts, music, in-game items, and videos. NFTs will revolutionize the way we look at them and open new revenue opportunities. Leverage the benefits of NFTs. Partner with our NFT development company to expedite your development journey.

How blockchain works and the impact it could have on the world

What is blockchain?

A blockchain is a database of information that stores transaction records that have not been tampered with. These records may include ownership of assets (stocks, bonds, real estate, cars, art), birth certificates, driver’s licenses, and votes cast. The blockchain is best known for its ability to store ownership records for bitcoin, but its potential applications are far broader than that. Compared with current record storage methods, blockchain has three main advantages:

cost. Transaction records can be updated automatically, saving expenses such as counting votes or hiring a lawyer to change land titles.
fast. Transaction records can be updated almost in real time. Conversely, a company’s accounts may only be updated once a year, and counting votes takes time.
data integrity. Land information can be tampered with, company profit and loss statements can be manipulated, and options can be backdated, but no one can change the data in the blockchain.

How Blockchain Works

A block is a collection of records. For example, a Bitcoin block contains all Bitcoin transactions that took place within 10 minutes (the Merkle root (or Tx_Root) in the image above); the record of each transaction contains the time, sender, receiver, and the transaction amount of bitcoins.

A blockchain consists of a series of blocks connected by a hash function (hash function). A hash function is a form of cryptography that converts data into a hexadecimal code that cannot be reversed to reproduce the original input value. The header of block 12 contains a hash function that reflects the content of block 11, and the header of block 11 has a hash function that reflects the content of block 10, and so on. In this way, it is impossible to fake the previous block, because it will cause the hash value of all subsequent blocks to change, Nft development company so this kind of fake is easy to detect. If someone wants to tamper with historical transactions, then he/she has to find a valid hash value for all subsequent blocks.

Any participant in the market can update information on a public blockchain — there is no centralized authority (unlike a land registry that manages land titles). To create block 13, a participant must concatenate the data of the new transaction (not included in any previous block) with the hash of block 12, the timestamp, and a nonce. A nonce is a random number that, combined with other information in the block, generates a new hash value. A valid hash value must be in a certain range, eg, must have several leading zeros. A participant needs to continue trial and error to generate the hash value corresponding to block 13 by finding a random number that meets the requirements. Once one participant succeeds first, the other members will verify and admit that block 13 is completed, and then go to calculate block 14.

The winning participant is rewarded with 12.5 bitcoins (in the Bitcoin blockchain); therefore, these potentially rewarded participants are what we call miners. This reward encourages miners to stitch together new transactions and build new blocks — which is actually a billing service fee. Miners choose and encode any transactions they want to include in the new block; typically no two miners will choose the exact same combination of transactions. An agent who wants to quickly get a proof of a transaction can voluntarily pay a fee (as an incentive) to the miner who successfully encodes its transaction into the next block.

This paper also introduces private and permissioned blockchains. In both blockchains, the updating of records is done by one party or a small group of multiple parties. The regulation of these blockchains is another interesting topic in itself, which is also mentioned in that paper.

How will blockchain affect the real world?

Most interesting is the paper’s discussion of the potentially transformative impact of blockchain.

Increased ownership transparency. Transaction history will be instantly visible to everyone. Currently, in the US, 13F reports on institutional investor positions are only published quarterly. Additionally, companies have three different shareholder lists (corporate, exchange, proxy voting); companies often do not know who their true shareholders are.
Transparency can make it difficult for investors to acquire a block without changing the share price, thus exacerbating the free-rider problem posed by Grossman and Hart in 1980 (Kyle and Vila (1991)).
Transparency prevents internal transactions and, conversely, encourages outsiders to obtain information (Fishman and Hagerty (1992), Bushman, Piotoski, and Smith (2005)). It also makes option awards or any other backtracking of financial transactions impossible. (Fishman and Hagerty (1992), Bushman, Piotoski, and Smith Greater liquidity. Executing and completing stock trades can be faster and more affordable. In the US, current settlements often take 3 days and involve multiple parties to complete.

Liquidity can strengthen shareholders through exercising their say (see Maug (1998) and Kahn and Winton (1998) models, and evidence presented by Norli, Ostergaard, and Schindele (2015)) and exiting investments (see Admati and Pfleiderer (see Admati and Pfleiderer (2015) 2009) and Edmans (2009) models, and Edmans, Fang, and Zur (2013), and evidence presented by Roosenboom, Schlingemann, and Vasconcelos (2014)) to achieve corporate governance.

Not only active shareholders, but ordinary people can also benefit from it. Currently, sending money from Zurich to New York is 7% and takes 3 days.
vote. Blockchain can be used to record votes in corporate elections. This would improve election accuracy and allay concerns that management had rigged to win an election with a very close majority. Since stock lending and borrowing will become transparent, the blockchain will also enable empty voting (modeled by Brav and Mathews (2011), empirically researched by Hu and Black (2006) and Christoffersen, Geczy, Musto, and Reed (2007) )) becomes harder.