Blockchain technology: Bangladesh perspective

In 2016, hackers stole $100 million from the central bank via its accounts with the Federal Reserve Bank of New York. If blockchain is implemented, this type of unwanted incidents can be stopped from occurring.

Blockchain-based businesses will have the greatest impact in developing countries like Bangladesh.

If it is used in government transaction management, the corruption rate will be very low.

Blockchain can be used to prevent double spending – using digital money twice.

If you give 5 percent charge per transaction, you will be charged the same amount of money in 100 transactions.

Blockchain is the technology and platform to solve this problem of digital money.

This subject is very much like a human fingerprint. As the fingerprints of two people will never be the same, the hash of the two blocks will never be the same.

What is blockchain technology?

Blockchains mean customer-to-customer transactions, while maintaining privacy and security without the help of third parties, using crypto-currency. In other words, this blockchain technology is the only medium of direct exchange without third parties using internet technology.

Note that in the case of a transaction, both the customer and the receiver will have to rely on a third party i.e. bank. For example, when you want to send money to a friend from one place to other, you need the help of bank which is basically a third party, or if you want to send money from one country to other lawfully, you need to get the government's permission; otherwise you will not be able to exchange currency.

And this is where blockchain technology can help you easily transact without the help of third parties. Digital money works here as crypto-currency, which has no physical presence.

Fig.1: Blockchain working principle

Why transactions are secured in blockchain technology?

All branches of a bank have a large ledger to record all transactions. Banks that use banking software have this record in their database. For a valid transaction, the bank must have the entry in the ledger.

Blockchain is a ledger like this, where there is one block after another. This block will contain data about all transactions taking place around the world.

This data is open but encrypted. That means everyone can see this data, but they need a private key to read it. If you trade here, only then you will be able to read all the details of your transaction using its private key, otherwise nobody can do it.

But people can see the amount of transaction here. No one can know whose money went to whom. The money will only go through the specific address. There will be no identity of the recipient or the donor.

Working principle of block chain technology in transaction

Fig.2: Blockchain in transaction

When a data or information is provided within the block of blockchains, it is almost impossible to delete that data or make any changes to the data. Note that every single block in a complete blockchain has basically three parts – data, hash and the hash of its previous block.
Each block has its own data, the block's own hash, and the hash of the previous block that was just behind it.

What is a hash? It is essentially an identifier. Each block has its own hash and is specific to everyone. The hash of the two blocks will never be the same. This subject is very much like a human fingerprint. As the fingerprints of two people will never be the same, the hash of the two blocks will never be the same.

These hashes are created according to the data stored in each block. That means if the data in a block is changed somehow, the hash of that block will also change. Now think about why each block has a hash of its previous block.

If each block has the same hash already attached to it, then no one can change the data in a block. So it can be said that it is almost impossible to delete or change every data provided on the blockchain. Another major reason behind secured block chain is that its network is distributed. This basically creates a peer-to-peer network.

Being a peer-to-peer network, the bitcoin transactions are done from the "wallet" of the service provider to the "wallet" of the receiver. Bitcoin is stored in the wallet. Everyone on the blockchain can verify the blockchain data on the internet.

When a new person registers on this blockchain network, he or she gets a copy of all the blocks before and after it and he or she verifies each block and ensures that every data in the block chain is still valid (Fig.2).
 
Fig.3: Blockchain transaction security

Suppose you have 100 bitcoins and you want to send me 50 bitcoins from there. In that case, this amount will be transferred from your wallet to my wallet. When you send the bitcoins to my wallet address, a new block will be created on the existing blockchain with all the details of this transaction.

The data in this block will contain the sender's wallet address, the receiver's wallet address and the amount of bitcoin being sent.

This new block will be available for verification to everyone connected to the blockchain. When they all confirm this block or make sure everything is fine, the record of this transaction will remain on the blockchain permanently and our transaction will be completed.

Those whose verify the transactions are called miners. As blockchain is a distributed and decentralized system, all users of the same blockchain have a carbon copy of all users in the same blockchain. So even if one or more servers or computers are destroyed together, nothing will happen to the blockchain (Fig.3).

Advantages of blockchain technology over existing technology

Blockchain transaction management does not require any third party. As a result, you can trade anywhere in the world without any hassle, which is very troublesome in the general banking system.

Think of a PayPal transaction system, money or user data sent here can be stolen at any time, but with blockchain system, identities are hidden and as data being updated regularly, it is almost impossible to imagine theft or corruption.

Future of block chain technology in Bangladesh

Without support from the Bangladesh government, it would be extremely difficult to realize the full potential of blockchain in the country. Blockchain-based businesses will have the greatest impact in developing countries like Bangladesh.

If it is used in government transaction management, the corruption rate will be very low.

The Bangladesh Bank holds around $28 billion in foreign currency reserves.

We know that in 2016, hackers stole $100 million from the central bank via its accounts with the Federal Reserve Bank of New York. The money was then transferred to accounts in the Philippines and then laundered through casinos in the country.
If blockchain is implemented, this type of unwanted incidents can be stopped from occurring.

In Bangladesh, blockchain can have applications in financial industries, such as remittance, credit and payment industries, trade processing and settlement, cross-border payment, blockchain Healthcare, blockchain music, e-governance, blockchain identity, passports, birth certificates, marriage certificates, and death certificates, etc.  

However, some key challenges remain. Regulatory confidence, cost of technology, data security (PII data), and investment to link and implement the technology with existing systems are some of the major considerations.
Blockchain can restore the currently eroding individual privacy and do away with unnecessary and risky intermediaries. Blockchain has the potential to establish transparency and accountability, eradicate fraud and corruption and give back power to the citizens.

We should consider and embrace this fully in Bangladesh.

Md Ariful Islam: Lecturer, Department of Robotics and Mechatronics Engineering, University of Dhaka