Block Chain

Dr.B.Sudhakar, Director, SIMS

A block chain is a continuous growing list of records, called blocks. The blocks are linked using cryptography. It is “a distributed ledger which is open that can record transactions between two parties efficiently which can be verified”. Once recorded, the data in any given block chain cannot be altered without alteration of all subsequent blocks, which requires the consensus of all in the network or the majority in the network.

The invention of the block chain was by Satoshi Nakamoto in 2008. He created it to serve as the public transaction ledger of the crypto-currency bit-coin then.  The crypto-currency bit coin the first digital currency helped to solve the double-spending problem without the need of a trusted authority or central server. The block chain technology can be integrated into different areas as well the bit coin design has also inspired lot of other applications. The block chains are used today primarily as a distributed ledger for crypto currencies, in the form of bit coin. Smart contracts which are based on block chain technology reduce moral hazards and optimize the use of contracts in general. Banking sector are interested in this technology as it has the potential to speed up the back office processes. According to a report by IBM in September 2016, majority of financial industry players are using distributed ledgers for banking which is growing at an alarming pace.

Block chain technology can also be used to create a permanent, public, transparent ledger system for compiling business data on sales, tracking digital use and payments to content creators, such as wireless users. Block Chain technology has created a new distribution method for the insurance industry such as peer-to-peer insurance, parametric insurance and micro insurance. Internet of things (IOT) will also get benefitted from block chains as they involve many collaborating peers. Understanding the new concept will help the management graduates to have a competitive edge in the market.