The global financial crisis of 2008 dealt a huge blow to people's confidence in their banking institutions. In its aftermath, emerged the world's first decentralized digital currency called Bitcoin, that was designed to avoid control of central banks and other similar financial institutions. The technology behind Bitcoin is called blockchain. But as a technology, blockchain is much more than a mechanism for recording monetary transactions. In this module, we are going to learn about blockchains, how they work and what are some of the interesting uses of the blockchain technology. Blockchain is a list of records called blocks which are linked using cryptography and are accessible for verification by the public. The list thus becomes a distributed digital ledger in which transactions such as those made with Bitcoins and other cryptocurrencies, can be recorded chronologically and publicly. There is a lot of interest in blockchains because they offer a secure yet transparent way of validating various kinds of transactions. There are many start-ups that are trying to realize the true potential of the blockchain technology in various domains. But the success of these startups and the blockchain technology itself depends on a few key questions. First one is, what can the blockchain do better than traditional databases? Traditional databases can also store transaction information chronologically. But secure databases are kept under the centralized control of a host organization and maintained by the IT administrators, for example, of a financial institutions. It is usually not open to the public for validation or for them to know if the data has been tampered with. Blockchains on the other hand, was designed to be decentralized so that a single central entity cannot control it and the transactions can be validated by anyone and are tamper proof. The second question is, can the technology enable peer to peer transactions, such as create smart contracts? Blockchains can serve as digital ledgers that link buyers and sellers of rooftop generated solar electricity, attract property titles and documents, secure health and financial transaction records, make automatic reparations for travel delays, et cetera. We're going to see some of these applications later on. Although the future of blockchain related innovations lie in the implementation of smart contracts, its primary application now is in cryptocurrencies like the Bitcoin. Bitcoin was launched to deal away with the middlemen and intermediaries in our financial institutions. That is, the bankers, the trusted third parties who were viewed responsible for the 2008 global financial crisis. Bitcoin aims to replace these middlemen with cryptographic code that will securely record transactions. So, in the traditional financial market, when you want to pay to your friend's bank account by a check, there are exchanges in the background between your bank and your friend's bank to ensure that your money is good because a bank maintains the record of all the savings that you have made. Bitcoin and other cryptocurrencies replace these banking exchanges with a cryptography based process in which the ownership of the bitcoin is passed from one person to another, irrespective of their geographic location or the government regulations that they live under with the help of a worldwide network of computers that support the blockchain for validating these transactions. One such blockchain platform is called Ethereum. Ethereum has its own cryptocurrency called Ethers and this platform is widely used for blockchain based innovations. Microsoft also offers tools to experiment with blockchain application on its Azure cloud. IBM, Intel and others are also collaborating on an open sourced blockchain called Hyperledger. The large U.S. banks have also created their own versions of blockchain software to make use of this technology. We have examples like JPMorgan, Citibank, Bank of America, American Express, Wells Fargo, and many other banks that are also interested in developing this technology. So, in the next video, we will now look at how blockchains actually work with the Bitcoin as an example.
