How Blockchain Technology Could Help Developing Countries Part 8

What blockchain networks do.

 

Blockchain technology can help banks, countries and all kinds of businesses both with moving money and with the management and protection of information of all kinds.

 

How blockchain networks operate

Blockchain technology is already moving money on networks such as Bitcoin, Ethereum, and others.

When a user on a blockchain network sends funds to another user, the network broadcasts the transaction for everybody on the network to see. Networks such as Bitcoin and Ethereum are public, which means that anyone can see the transactions as users sends funds and the history of all the transactions on the networks since their inception, but on a private network things could be different. For example, a group of banks could create a blockchain that only the banks from the group would use and nobody outside of the group would be able to access the blockchain. In this case, the banks would still benefit from the blockchain technology and the security that it provides.

Transactions that a blockchain network broadcasts as users send them are known as unconfirmed transactions. Here you can see the transactions on the Bitcoin network: https://www.blockchain.com/en/btc/unconfirmed-transactions and here you can see pending transactions on the Ethereum network: https://etherscan.io/txsPending

After this, miners compile the data about transactions into blocks of the blockchain and seal the blocks with hashes. In cryptography, a hash is a string of data generated by a cryptography algorithm that is shorter than the original string of data. For example, block #530463 of the Bitcoin blockchain contains information about 2544 transactions, including timestamps, amounts, wallet addresses, and more, yet the hash for the block with the data about all these transactions is 0000000000000000001caea102b63adbb7974add5c57c0e545ad1d5d9efe1b4e.

 

How blockchains use hashes and cryptography algorithms

A cryptography algorithm generates one and only one hash for one set of data, which makes hashes great for data verification. For example, if you send someone a large set of data and you want to make sure that the data did not get damaged on the way, you can ask that someone to send you the hash for the data. Then, you both run the data through a cryptography algorithm and compare the hashes. If both of you get the same hash, it means that the data did not get damaged when you sent it. If the hashes are different, it means that the sets of data are different, yet because you compared the hashes, you don’t even need to look at the original data. You simply know that there is a problem somewhere. This is extremely convenient when the sets of data are very large and checking that the data is the same manually would take a lot of time and effort.

Another way to check the validity of data using cryptography would be to send someone the data and the hash. This way, you don’t even have to do anything after you send out the information. The other party can run the data through a cryptography algorithm and see if it gets the same hash. If it does, it means that it has undamaged data and there’s no reason for the sender to do anything. If it doesn’t, then the process of sending can start over.

 

Using blockchains to store data error-free

Hashes make blockchain networks extremely secure. No matter what industry you look at today, you will likely find people doing a lot of manual work with data and making mistakes that go unnoticed. For example, in many municipalities in the United States, a real estate deal is a valid deal even when people do not register the deal with the Office of Records. When people are registering properties or updating information about a property, they sometimes fill out a paper and then a clerk at the office manually enters the information into a computer. People can also send papers via mail and then an office would scan the papers or, again, enter the information manually, which means that the information can contain errors. With blockchain technology, the information could be protected by hashes which would make the information immutable and eliminate errors. For instance, a property profile could have a hash that different offices could use to make sure that they have the same information about the property. When someone updates information about the property, they could generate a new hash and the update could go through a verification procedure to make sure it doesn’t contain any errors. Once the verification process is over, the updated record could become a part of a blockchain, which would mean that the blockchain would contain true, error-free and immutable information about properties.