Blockchain Technology & Crypto Token
August 22, 2018
The Theory of Blockchain and Crypto Token Concept
The latest and newest buzzword is Blockchain which has been in the alternative financial market for almost ten years but got a wide popularity in the internet world at present.
What is blockchain?
Blockchain is a modified decentralized monetary transaction system or digital public ledger account where each transaction is checked, recorded and processed between Peer to Peer computers in the web network. A certain block is a set of the validated transaction which is secured by using certain desired encryptions and numerous blocks joined together in a chronological chain (like in the order of time), where there each block is inter-connected to its previous block in a cryptographical manner i.e. each block possess an address of the previous block. The very first block is called Genesis, as in the beginning.
A new block will be created just after the transaction starts. The transactions within a block are validated at the consensus of the P2P (Peer to Peer) computers or miners and once the transaction gets finished, the block is inserted into the respected system. This structure of the conjoined sets of secured and transparent transactions is called the blockchain.
The Origin of Blockchain
This vision and knowledge of cryptographically linked blocks was first invented in the 1990s where the initial aim was to avoid tempering of the documents and their metadata. In 2008, the term bitcoin was coined by a person or a group of persons under the pseudonym “Satoshi Nakamoto”. After the economy saw a downturn due to the major recessions owing to the collapse of financial institutes this bitcoin system of alternative transaction gave a whole new idea and notion to build new hope with. The heart of blockchains lies in the bitcoin which started taking proper shape and use in 2014-15 when the implementation of a blockchain was realized not only in the financial system but many other systems where transactions happen between certain peers.
The Advantages of blockchain
- Decentralized system
The backbone of the blockchain system is a decentralized system where there is no central governing authority but the reign of the governance is in the hand of each functioning P2P computer or miner. A copy of the ledger is maintained for each actor (P2P computer or miner) and a mediator or a regulatory authority is absent. This makes the blockchain a decentralized system which lessens the chances of downfall and collision.
- Reliable and transparent exchange
Blockchain solves the oldest problem of the trust factor in a transaction system. From the era of the barter system, the trust has always been the most threatening factor in any of these exchange systems. There is no regulating authority in blockchain but the system itself is governed by the strict protocols and with proper investigation and control. Each transaction is known to each individual and a certain privacy of transparency is always at an edge.
- Immutable and Secured
In blockchain, transaction once performed, cannot be changed. If a transaction is to be changed, all the previous transactions are also changed accordingly that too with a permission of the major authority. Also, each individual has the same version of the truth about the transactions, thus the system is negligibly vulnerable to tampering and as a result, it is robust and absolute in need.
The absence of a third person involvement in between or a common governing authority reduces the cost chart. Just like the banking system, the regulation needs a lot of infrastructure investments which can be bypassed through a blockchain system.
In a traditional system, the fixed working hours, the various time zones and the intermediate lag of work due to third person involvement in between makes the system much slow. 24 hours availability of a blockchain system reduces the lack of human tiredness in transactions making it fast and efficient.
- Empowered User
Individual users are the main regulating authority in a blockchain and they know the transactions thoroughly.
Concept of Crypto tokens
Crypto Token is often confused with cryptocurrency, bitcoin, altcoins and other similar names of Blockchain infrastructure. But speaking technically, these all have different aspects of blockchain technology.
Cryptocurrency is the nonphysical digital currency being exchanged between nodes as digital payment in a certain blockchain transaction. One such example of cryptocurrency is bitcoin. A crypto token is a sub-divisional set of Cryptocurrency. It is a kind of digital token that resides and functions in its own blockchain system representing an asset or even money in a lucid layman language. A crypto token is created by the users or the system during a certain transaction.
A token in blockchain is an encrypted data which plays a stand-in for the real data. It is a string of numbers and characters which is undecipherable coded form of data and is passed from one user after masking the real data into stand-in data which is decrypted by the receiving person after it was received.
In a blockchain, there can be three types of tokens: Value tokens, Security tokens, and last but not the least Utility tokens.
Value Token: A value token is a simple token which represents money or currency. For example, a bunch of 20 bitcoins (20BTC) in a system or 1$ either in paper currency or in digital format.
Security Token: A string of numbers and characters mainly used in the computer security. This is mainly used to mask a data stream while being shared between users. The data is encrypted at the sending person’s end and is decrypted at the receiving person’s end for usage. This is mainly used in general messaging systems all over.
Utility Token: A utility token does not need to be an only monetary system. For example, a coupon received by an individual user in a system which can be used to prevail a function or facility can be designated as a perfect utility token.
Usage of tokens in Blockchain:
In the blockchain system, tokens are used in a transaction to masquerade the important information and data carried from one peer to another end. This masking or coding of the real data or information into encrypted data maintains the secured privacy of the data in the publicly shared ledger system.
In a nutshell, the process of digitally tokenization is one of the key aspects in maintaining the security of the transactions in the publicly open system like the blockchain.