What is Blockchain?

10 July 2017
What is Blockchain?

A Blockchain allows digital information to be distributed but not copied. It was originally devised for the digital currency, Bitcoin.

A blockchain is a decentralized and distributed digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. This allows the participants to verify and audit transactions inexpensively.

The invention of the blockchain for bitcoin made it the first digital currency to solve the double spending problem (i.e. an error in a digital cash scheme in which the same single token is spent twice) as it confirms that each unit of value was transferred only once .

Blockchain is a distributed database that is used to maintain a continuously growing list of records, called blocks. Each block contains a timestamp  and a link to a previous block.

A blockchain serves as "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. The ledger itself can also be programmed to trigger transactions automatically."[1]

Blockchains are said to be secure by design (designed from the ground up to be secure) and facilitate secure online transactions. Blockchains are potentially suitable for the recording of events, records, management activities, identity management, transaction processing  and documenting ownership. However, it does need to be recognised that any implementation of a Blockchain, be it public or private, may have inherent vulnerabilities that could be exploited if sufficiently effective security controls are not put in place.

A blockchain database consists of two kinds of records: transactions and blocks. Blocks hold batches of valid transactions that are hashed and encoded into a Merkle tree. Each block includes the hash of the prior block in the blockchain, linking the two. This process confirms the integrity of the previous block, all the way back to the original block. Some blockchains create a new block as frequently as every five seconds. The integrity of the blockchain will be dependent upon the integrity of the hash, a potential concern as processing power increases temporally.

[1] Iansiti, Marco; Lakhani, Karim R. (January 2017). The Trurth About Blockchain. Harvard Business Review: Harvard University.

https://www.youtube.com/watch?v=6WG7D47tGb0

http://www.coindesk.com/information/what-is-blockchain-technology/

https://blockgeeks.com/guides/what-is-blockchain-technology/

 

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