Blockchain

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• September 30, 2020

Blockchain was invented by Satoshi Nakamoto in 2008 for the very first time to serve as the public transaction ledger of the cryptocurrency bitcoin. Many people think of blockchain as a technology that powers bitcoins only, while this was its original purpose, blockchain is capable of so much more.

Blockchain, which originated to appear as a real-world tech option in 2016 and 2017, is dignified to change IT in much the same way open-source software did a quarter century ago. Blockchain will expect to take years to become a lesser charge, extra efficient way to share information and data between public and private business networks.

It is a technology that allows data to be stored and exchanged on a peer-to-peer (P2P) basis. It is used in a decentralized manner, which removes the need for intermediaries or third parties to validate transactions. Blockchain is shorthand for a whole suite of distributed technologies. 

Objective
Let’s breakdown the reason why blockchain technology stands to revolutionize the way we interact with each other

• The way it tracks and store data
  • Blockchain stores information in batches, called blocks. All the blocks are linked together in a chronology fashion to form a continuous line, metaphorically, a chain of blocks.
  • If you mark a change to the information recorded in a certain block you don’t redraft it. Instead, the change is stored in a different block. That is because it is based on the old method of countries financial ledger.
  • Blockchain was intended to be decentralized and distributed through a large network of computers. This decentralizing quality of information, it reduces the ability for data tempering.

• It creates Trust in the data
  • Before the block to be added to a chain, few things have to happen. Firstly, a cryptography puzzle must to be solved thus creating a block. The computer that solves the puzzle shares the solutions to all of the other computers on the network and this is called proof of work;
  • After verifying the proof of work over the network and, if accurate, the block would be added to the chain. The combination of these composite math puzzles or any confirmation by many computers ensures that we can trust each and every block on the chain; and
  • Because the network does the trust building for us, we now have the opportunity to interact directly with our data in real-time.

• Eliminate intermediaries
  • Presently, when doing business with one another, we don’t need to show the other person our financial or business records. Instead we do rely on trusted intermediaries, such as bank or lawyer to view our records and retain that information confidential;
  • Although these intermediaries build trust between the parties and are able to verify, this approach limits exposure and risk but also adds another steps to the exchange which means more time and money spent; and
  • If the Information and saved into blockchain one can cut the intermediaries cost. All block added to the chain have been verified to be true and can’t be tempered with, secured in the block chain. This type of trusted peer to peer interaction with our data can revolutionize the way we access, verify and transact with one other.

How does it Functions
The concept of single universal ledger is the heart of a blockchain. Whenever a transaction or set of transaction get happens it gets added on, as one more block in a chain of already existing transactions. Also this blockchain is protected by amongst the best cryptography algorithm available so very difficult to hack.

The other important thing is every block is added is immutably link that last block is linked to the last blog. So if you have to change one blog or hacker wants to hack these blogs, the entire chain has to be changed which is very difficult to do. Therefore, you can trace back any event block by block. 

Internet VS Blockchain
Blockchain was early like the internet in the 1990s but it could be as big too. However, it is similar to internet yet different from the internet. It promises to solve the two problems that internet could not and bring back actually a true and honest to goodness peer to peer economy.

Types of Blockchain 

Public Key: It is open to everyone to view and access. As a peer-to-peer network, united with a circulated time-stamping attendant, public blockchain ledgers can be managed separately to exchange information between parties. There’s no need for an administrator and the blockchain users are the administrator itself. 

Private Key: It is also called as permissioned key. It allows companies to create and centrally manage their own transactional grids that can be used inter-company or intra-company with partners. These are the selected group or authorized users over the network. 

Hybrid Key: This is the mixture of both private and public key. Those with private key access can see all the data while the public access can see only selections. In other words, everyone can see all the data but only some people have access to add new data.

How Blockchain Used in GST regime
As we know blockchain is a new type of database created in a crypto digital ledger which retains all historical information in digital blocks. Distributed ledgers are fundamentally difficult to attack. This is how complete and totally transparent audit trail is maintained throughout the chain. It not only help in monitoring of correctness and fast decision-making for refunds and other compliances but would also help assess transactions and their chain of sources in real-time.

Tax invoices contain significant information. Using blockchain to develop and design tax invoices would alleviate foremost compliance issues like filing returns and claiming ITC (Input Tax Credit) etc. in a pre-defined manner. With the help of blockchain the complete functioning of all the ledgers under GST work efficiently by eliminating manipulation. The blockchain has the potential to play a prominent role in the GST regime.  

We can take another example of Walmart
Initially, Walmart was facing a problem in delivering the quality product to its customers. They were facing a high return rate and large amount of refunds due to the products quality. It was the complete failure of supplying chain.

Walmart adopted block chain technology. After that the quality of the goods at each step was prominently inscribed within a blog. For Example – when a customer place a complaint against product, it can be correctly identified where the product get damaged in the entire supplying chain.

Few other examples where blockchain is used are banking system, Property records use, Use in cryptocurrency and many more. 

Advantages
Blockchain is itself has all the potential to underpin many of the ways we interact with each other. But much like a rise of the internet, this technology will bring with it all kind of complex policy questions around governance, international law security and economics.

• It improves accuracy by eliminating human intervention in verification.
• Cost reduction by eliminating third party verification and involvement.
• The decentralization quality makes it harder to temper with.
• Transactions are secure, private and efficient and also a transparent technology.

In nutshell, we can say “Blockchain is an answer” now ask the question! 

Disadvantages
While there are momentous upsides to the blockchain, there are also certain challenges to its acceptance. It requires thousands of hours of custom software design and back-end programming required to incorporate blockchain to recent business networks.

• Significant technology cost associated with mining bitcoin and in other areas as well.
• It has low transaction per second and history might get used for illicit activities.

At AJSH, we assist our clients in dealing with various corporate matters (Company incorporations, statutory audits, ROC Compliances, Company winding up), ITR Filings, TDS Compliance, and related services by providing them adequate support and guidance from our end. If you have any questions or wish to know more about block chain, you may contact us.