Blockchain Technology and why it is important for your business

With businesses increasingly embracing globalization, it has become increasingly inevitable for businesses to establish an online presence by digitizing their businesses.

Digitization and or e-commerce involves running a business over the internet right from customer sourcing, customer acquisition, service delivery, customer satisfaction and feedback, and customer retention.

All these online processes involve exchange of data between the business and the customer, sometimes sensitive data like contacts, and credit/ debit card information just to mention a few. This data needs to be protected to avoid unauthorized manipulation and to gain customer trust. This is where block chain technology comes in handy.

Block chain explained

In simple language, a block chain is a string of blocks of digital information that are linked and stored together in a public database. Information stored in a block chain can be viewed but not manipulated by the public (with the exception of sensitive personal data)

In accounting terms, a block chain refers to a distributed, decentralized, public digital ledger that can be accessed by all stakeholders.

According to Investopedia, a block on the block chain is made up of three major parts namely:

1. Information about transactions like date of transaction, time, amount, product type e.t.c.
2. Information about who is participating in the transaction (name, username, ID or unique code). Your transaction is tagged to your automatically generated unique code
3. Each block is stored using a unique code called a hash. Hashes are cryptographic codes created by special algorithms. That means that if u made two separate transactions, they may be stored in two different blocks, each with a unique hash. For larger platforms like the Bitcoin, a single block can store up to 1 MB of data, meaning a block can house a few thousand transactions.

How block chain works

When a block stores new data, it is added to a block chain. In order for a block to be added to a block chain;

1. A transaction has to occur and be added to a block. In some cases, a block groups together potentially thousands of transactions, so one transaction may be packaged in the block along other users’ transactions.
2. The transaction details must be verified with other public records of information e.g. email must be verified with google; digital signatures must be verified against the digital signature database; payment information must be verified with credit/debit card financial institutions etc.
3. Once the transaction details are verified, the transaction is stored in a block. Likely it will be stored with other transactions in the same block.
4. The block is given a hash in chronological order. Then it is added to a block chain.

Once added to a block chain, it becomes publicly available to view.

Is it private?

Basic information about transactions is public and can be viewed by everyone in the block chain.

However, information that can be used to hack user information is encrypted. This means that it observes best practices of data privacy.

Each computer (node) in the block chain network has its own copy of the block chain, creating thousands of copies that are not easy to manipulate in case someone wants to hack the information.

Is it secure?

Block chain technology accounts for security in several ways. New blocks are stored linearly and chronologically. New blocks are added to the end of the block chain, which makes it difficult to go back and alter the content of the block since each block contains its own hash, along with the hash of the block before it.

Hash codes are created by a math function that turns digital information into a string of numbers and letters.

Hackers would find it difficult to alter information in a block because that means they would have to alter all the preceding blocks to cover their tracks, which is close to impossible.

Importance of Block chain Technology

• Immutability

Block chain information cannot be easily altered, this means that data transit is secure

• Information transparency

Due to its nature, the block chain provides basic view of information to the public. This information could be useful for processes like carrying out voting exercises as the public can view information in real time and cannot manipulate it easily.

• Digital Freedom

This technology provides its users with the freedom to manage their data and track their information without necessitating a third party for example when tracking shipments.

Source: Investopedia