There is a growing consensus that blockchain technology will have an outsized impact on the future of business. It is currently in the early stages of its development and there are many unanswered questions surrounding its scalability, security, and permission or permissionless applications.
The idea behind a blockchain is that it allows anyone to add a new record to the blockchain, with or without prior approval from the blockchain owners. An owner of a particular blockchain has access to a specific ledger and they can approve or deny any transaction. Transactions are verified, therefore a chain of accounts can be maintained.
Concept Of Blockchain
The concept of a chain of blocks has been described as a closed ledger. This is similar to how a physical chain works. However, with a blockchain, the information in each block is valid until that block is verified and validates it to the next block.
A blockchain is built using a special kind of ledger called a virtual ledger. It is supported by a full data layer protocol, including a Secure Digital Signature Algorithm (SDSA) and message authentication code (MAC). The data layer protocol and SDSA ensure that only the owners of the virtual ledgers have access to the information in the ledger.
In a closed chain, the information in each block is tied to that block’s owner. The blockchain can be linked with other ledgers such as stock or check issuance systems. When the system is used for authorization purposes, the system becomes permissioned. This is a new concept that is being debated by some expert groups and industry experts.
The key issue here is whether the owner of the ledgers controls the information. To determine this, a blockchain software application would have to be developed which verifies that a valid record was included in the block before the block was committed. Then the database would need to create and then verify the block before the information could be added to the blockchain. This process would need to be repeated for each block.
In a permission chain, the information in each block is owned by an entity, which owns the ledger and controls it. Because all transactions within the ledger belong to one entity, it has to be proven that all information in the ledger is correct.
In an open chain, each block has its own unique identity and a record of transactions. This means that the information within the block is not owned by a single entity.
The choice between permission and an open chain is between providing trust or proving ownership. Although a lot of attention has been paid to the rights of those that own the ledgers, it may be impossible to prevent anyone from altering, removing, or tampering with information on the ledger.
There are several potential applications for a blockchain system. One example is mobile commerce. There is a growing number of devices on the market, including smartphones, PDAs, and tablets that have the capacity to run a blockchain system.
Many retailers now accept payments through cell phones, allowing customers to make purchases using their device. Because these devices have the ability to use a Blockchain system, it makes sense that they would also have the ability to add transactions to the ledger.
Whether a closed or an open chain, the importance of being able to verify and maintain the integrity of transactions is crucial to the success of any system. Of course, the answer to that question will largely depend on the specific use of the ledger.