What is blockchain technology and how does India plan to use it?
Blockchain is essentially a database, but very different from any other database you’ve seen. As the name suggests, a blockchain is a chain of blocks, with each block storing information.
The other key characteristics of blockchain are that it is decentralized, and by the very nature of this design, it is immutable.
Let’s see how it works by taking the example of the blockchain that powers Bitcoin, the world’s first cryptocurrency by market capitalization.
When a new Bitcoin transaction takes place, it is transmitted to a network of peer-to-peer computers scattered around the world.
These computers compete with each other to solve complex mathematical equations that would confirm the validity of this transaction.
Once the transaction is confirmed as legitimate, it is added to a “block” on the “blockchain”.
These blocks are then chained together, creating a long history of all transactions that are permanent.
An important feature of the blockchain here is its decentralized or shared nature.
Unlike other databases which are controlled by a central authority or a computer, a blockchain, in most cases, is accessible to a network of computers, called nodes.
All these computers can view the blockchain at any time and track each transaction added to it.
This is also why data on a blockchain is immutable.
Since the blockchain is present on every node, if a node has an error in its data or if someone tries to tamper with the blockchain by compromising one of the nodes, all other nodes will serve as reference points and prevent the falsification.
Thus, data on a blockchain is, for all intents and purposes, irreversible.
This irreversible aspect of the blockchain is why its use is advocated for governance functions, such as the storage of important records and elections.
Additionally, as blockchains are decentralized and visible to their various nodes, they are seen as transparent – any IT part of the blockchain network can view them in real time.
While cryptocurrency is the most popular use case for blockchain, governments around the world and in India are rushing to take advantage of this technology for governance and public administration purposes.