A blockchain is a decentralized and distributed digital ledger used to record transactions across multiple computers so that any involved record cannot be altered retroactively, without the alteration of all subsequent blocks. This allows participants to verify and audit transactions independently and relatively inexpensively. Here are the essential aspects and features of blockchain:
- Traditional databases, such as a SQL database, are centralized. Meanwhile, on the blockchain, every participant (nodes/computers) on the network has access to the entire database and the complete transaction history. Everyone can verify the records of its transaction partners directly, without an intermediary.
- Transactions made on the blockchain are transparent and can be viewed by anyone within the network. This transparency ensures all participants agree on the validity of transactions.
- Once the data has been written to the blockchain, it is extremely difficult to change it back. It ensures that no transaction is altered or deleted.
- This is a technique used to achieve agreement on a single data value among distributed processes or systems. Blockchain uses consensus models like Proof Of Work and Proof Of Stake to agree upon the validity of transactions.
- Transactions must be verified by the network through a process often involving solving complex mathematical problems. Once verified, these transactions are encrypted and linked to the previous transaction. Along with the use of cryptographic techniques and consensus algorithms, this ensures the security of the information.
- These are self-executing contracts with the terms of agreement or conditions directly written into lines of code. They automatically enforce and execute when certain conditions are met.
- A blockchain is composed of multiple blocks, each containing a record of transactions. When a block is filled with transactions, a new block is created and linked to the previous one in a linear, chronological order.
- These are any electronic device that maintains copies of the blockchain and keeps the network functioning.
- This is a consensus mechanism used in many cryptocurrencies. Miners solve complex mathematical problems to add transactions to the blockchain. This process confirms and validates transactions and secures the network.
- While it started with Bitcoin, the use of blockchain technology has expanded greatly. Its applications range from supply chain and trade finance to voting systems and identity verification.
In essence, blockchain is revolutionary because it minimizes the need for trust in transactions. While it initially powered cryptocurrencies, its potential applications are vast and continue to be explored across various industries.