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Block Chain

ICMAP handout for SM

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9 views

Block Chain

ICMAP handout for SM

Uploaded by

faizanq680
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Block chain

Block chain is a method of recording information that makes it impossible or difficult for the system
to be changed, hacked, or manipulated. A block chain is a distributed ledger that duplicates and
distributes transactions across the network of computers participating in the block chain.

Characteristics of Block Chain


1. Block chain provide highly secured end to end encrypted transactions recording mechanism
that base on unique digital signature of every individual in the system.
2. It is decentralized system. There is no regulatory authority or centralized system that can
influence or intercept at any level to amend, edit, modify or change the recorded data.
3. Every transaction is recorded on all nodes at the same time that make it safe, reliable and
accurate.

Structure and Design of Blockchain


1- Block
A blockchain is “a distributed database that maintains a continuously growing list of ordered records,
called blocks.” These blocks “are linked using cryptography. Each block contains a cryptographic
hash of the previous block, a timestamp, and transaction data.
1. Previous block cryptographic hash: It’s the unique code of previous block.
2. Timestamp: A timestamp on the blockchain is a record that pinpoints when a specific
transaction or event occurred, often detailing the exact date and time.
3. Transaction data: The data related to actual transactions like sender and receivers id,
transaction value etc.

2- Block Time
Block Time represents the amount of time it takes to verify and add a new block to a blockchain.
Another way to think about block time is that it's the amount of time a miner takes to solve the
complex hashing problems, which verifies all of the transactions in a given block and adds it to the
blockchain.

3- Hard Forks
A hard fork is a change to the blockchain protocol that is not backward compatible and requires all
users to upgrade their software in order to continue participating in the network. In a hard fork, the
network splits into two separate versions: one that follows the new rules and one that follows the
old rules.

4- Decentralization
Decentralization is the key feature of blockchain technology. In a decentralized blockchain, there is
no single central authority that can control the network. In decentralization, the decision-making
power is distributed among a network of nodes that collectively validate and agree on the
transactions to be added to the blockchain. This decentralized nature of blockchain technology helps
to promote transparency, trust, and security. It also reduces the risk to rely on a single point of
failure and minimizes the risks of data manipulation.
5- Openness
Openness in blockchain technology makes the blockchain accessible to anyone who intends to
participate in the network. This implies that it is open for all and anyone can join the network,
validate transactions, and can add new blocks to the blockchain, so long as they know the consensus
rule.

6- Public Blockchain
It is a kind of blockchain which is open for the public and allows everyone to join the network to
perform transactions and to participate in the consensus process. Public blockchains are
transparent, because all transactions are publicly recorded.

7-Permissionless Block Chain


A permission less blockchain is fully decentralized and accessible to anyone who can join the
network and participate in the consensus process

8- Permissioned or Private Block Chain


A permissioned blockchain is a controlled and private network where access to participate and view
the data is restricted to authorized entities. They are employed by organizations and groups that
require enhanced control, privacy, and security over their blockchain activities.

Disadvantages of Private Block chain


1. Lack of transparency, because there is a central authority that manages blockchain.
2. High cost, running a private block chain is very expensive because cost is centralized and had
to bear by one party.
3. The private block chain can be tempered by the administrator, this flaw makes it unreliable.
4. Trust issue, in private block chain all participants must trust the controlling entity otherwise
purpose of block chain will be lost.
5. Security risk, if the permissions and access controls are not managed properly, they can still
be vulnerable to unauthorized access.

Blockchain and Internal Audit


Blockchain technology offers several benefits for internal auditing, such as enhanced transparency,
improved data integrity, and real-time access to financial records. Here's a detailed look at how
blockchain can impact internal audit processes.
Following are the benefits of using blockchain in internal audit
1. Real time access to data.
2. Ability to drill down the transaction to its origin.
3. Enhance transparency and reliability of data.
4. Reduces risk of fraud and manipulation of data.
5. Reduces the need for intermediaries and make the process efficient.

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