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Blockchain Technology and Applications

University of Texas at Austin_091921A
[ The University of Texas at Austin]

 

- Overview

A blockchain is a distributed database where every entry needs to be approved by a network of peers without any intervention from an intermediary or central authority. This distributed, decentralized nature of the database makes it highly secure and transparent, as multiple nodes (peers) in the network have copies of it. 

If there is any anomaly in a single node's database, other nodes in the network can point it out and correct it. It is an ideal feature not only for the financial industry, but for any industry that values data security and transparency.

 

- DAO and Blockchain

A DAO or "Decentralized Autonomous Organization" is a community-led entity with no central authority. It is completely autonomous and transparent: smart contracts lay the ground rules, enforce agreed decisions, and at any time, proposals, votes, and even the code itself can be publicly audited. 

Ultimately, the DAO is governed entirely by its individual members who collectively make key decisions about the future of the project, such as technology upgrades and funding allocation. 

Generally, community members make proposals for the future operation of the protocol, and then come together to vote on each proposal. Proposals that reach some predefined consensus level are then accepted and executed through rules instantiated in the smart contract. 

The familiar hierarchical structure seen in large corporations gives way to community collaboration under this framework. Each member of the DAO oversees the protocol to some extent. 

Part of the elegance of this framework is the alignment of incentives. That is, it is in the best interest of an individual to be outspoken in voting and to only approve proposals that are in the best interest of the protocol itself.

 

- Blockchain: Disrupting the FinTech

Financial technology (FinTech) has disrupted banking, and blockchain has disrupted fintech. The blockchain is the public ledger of all executed Bitcoin transactions. Blockchain is the technology that underpins the Bitcoin digital currency and the technology that drives open finance, a decentralized public transaction ledger (or distributed ledger) that is revolutionizing the way people around the world exchange value. In the simplest terms, a blockchain is a series of time-stamped immutable data records managed by a cluster of computers that do not belong to any single entity. Each of these blocks of data (i.e. blocks) is secured and bound to each other using cryptographic principles (i.e. chains). Blockchain has no transaction costs. 

Blockchain is a simple and ingenious way of passing information from A to B in a fully automated and secure way. One party to the transaction initiates the process by creating a block. The block is verified by thousands or even millions of computers distributed across the network. Verified blocks are added to a chain, which is stored across the network, creating not only a unique record, but a unique record with a unique history. Falsifying one record would mean falsifying the entire chain in millions of instances. It's almost impossible. Bitcoin uses this model for currency transactions, but it can be deployed in many other ways. 

Taking traditional banking as an example, blockchain is like a complete history of banking transactions. Just like banking transactions, Bitcoin transactions are entered into the blockchain in chronological order. At the same time, blocks are like personal bank statements. A complete copy of the blockchain records every Bitcoin transaction ever performed. As such, it can provide insights into facts such as how much value a particular address was worth at any point in the past.

 


[More to come ...]

 

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