block chain software

blockchain technology

block chain software

The block chain is an on line decentralised public ledger of all digital transactions that have taken place. It is digital currency's exact carbon copy of a higher street bank's ledger that records transactions between two parties block chain software.

Just like our modern banking system couldn't function without the way to record the exchanges of fiat currency between individuals, so too could an electronic network not function without the trust that originates from the capacity to accurately record the exchange of digital currency between parties.

It is decentralised in the sense that, unlike a normal bank that is the only holder of a digital master ledger of its account holder's savings the block chain ledger is shared among all members of the network and is not subject to the terms and conditions of any particular financial institution or country blockchain technology.

A decentralised monetary network ensures that, by sitting outside the evermore connected current financial infrastructure one can mitigate the risks of being element of it when things go wrong. The 3 main risks of a centralised monetary system that have been highlighted as a result of the 2008 financial crisis are credit, liquidity and operational failure. In the US alone since 2008 there have been 504 bank failures due to insolvency, there being 157 in 2010 alone. Typically this kind of collapse does not jeopardize account holder's savings due to federal/national backing and insurance for the very first few hundred thousand dollars/pounds, the banks assets usually being absorbed by another financial institution however the impact of the collapse may cause uncertainty and short-term problems with accessing funds. Since a decentralised system such as the Bitcoin network is not dependent on a bank to facilitate the transfer of funds between 2 parties but alternatively utilizes its thousands of users to authorise transactions it's more resilient to such failures, it having as many backups as there are members of the network to make sure transactions continue to be authorised in the case of one person in the network'collapsing'(see below).

A bank need not fail however to impact on savers, operational I.T. failures such as for instance the ones that recently stopped RBS and Lloyds'customers accessing their accounts for weeks can impact on one's ability to withdraw savings, these being a result of a 30-40 year old legacy I.T. infrastructure that's groaning under the stress of keeping up with the growth of customer spending and deficiencies in investment in general. A decentralised system is not reliant on this sort of infrastructure, it instead being on the basis of the combined processing power of its thousands of users which ensures the capacity to scale up as necessary, a mistake in just about any part of the system not inducing the network to grind to a halt.

Liquidity is a final real danger of centralised systems, in 2001 Argentine banks froze accounts and introduced capital controls as a result of these debt crisis, Spanish banks in 2012 changed their small print to allow them to block withdrawals over a quantity and Cypriot banks briefly froze customer accounts and used up to 10% of individual's savings to simply help pay off the National Debt blockchain database.

As Jacob Kirkegaard, an economist at the Peterson Institute for International Economics told the New York Times on the Cyrpiot example, "What the offer reflects is that becoming an unsecured or even secured depositor in euro area banks is much less safe because it used to be." In a decentralised system payment occurs without a bank facilitating and authorising the transaction, payments only being validated by the network where there are sufficient funds, there being no third party to stop a transaction, misappropriate it or devalue the total amount one holds.