Put simply, blockchain is data that’s stored and maintained by a decentralized network of computers.
This is trustless technology which can radically change the world as we know it, redefining how we deal with data and transfer value. As an example, blockchains lets us send digital money peer-to-peer without going through any bank. It’s technology that can eliminate the middleman in many traditional sectors: banking, insurance, entertainment, government and more. Although it’s still at an early stage of development, blockchain technology is already being used in real life for cryptocurrencies, storage of government data, and so on, and many in both the private and public sectors are exploring potential use cases.
The best-known blockchain to date is that used for the cryptocurrency Bitcoin.
How does it work?
Entire books have been written about how the blockchain works, but let’s take a look at the key points and consider the example of Bitcoin:
Blockchain technology records information related to Bitcoin transactions, such as where the money came from and where it went, the time of the transaction, the amount, any fees paid, and other data. All this information is stored in a chain of “blocks”, which are a kind of container. In the case of Bitcoin, each block contains data for about 2,000 transactions (at least as of late 2017). Such blocks of transactions are back-linked with the help of cryptography.
Blockchains can store many different kinds of data: the details of cryptocurrency transactions, the contents of a land register, insurance records, health history, car accident history, changes of ownership, etc. They can also serve as a platform for other applications.
Blockchains, as distributed and timestamped ledgers of all transactions, are stored on a decentralized (in most cases) network of computers, also called ‘nodes’. Each computer stores a copy of the whole blockchain in question.
Features of blockchains:
- They’re practically immutable, since altering any information would require enormous computing power, and the longer a blockchain becomes, the safer it is.
- They tend to be transparent, since typically anyone can see the data on a blockchain (like Bitcoin, for example) using a “blockchain explorer” that lets you view all transactions. Some blockchain technologies, however, offer more anonymity.
- They tend to be decentralized, meaning there’s no central authority behind them – unlike a traditional database, which can be shut down or censored at the will of its owner. And even if part of its network goes down, a blockchain will still remain operational 24/7. But there are blockchain projects with a more centralized approach.
All these features combined offer hope that many of our daily routines can become more effective, transparent, faster, and cheaper.
Types of blockchains:
There are two types of blockchains:
Public (such as Bitcoin), where anyone can join the network of nodes.
Private (mostly used by businesses), where only those with permission can add their computer to the network.
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