A blockchain is a digital record of transactions. The name comes from its structure, in which individual records, called blocks, are linked together in single list, called a chain. Blockchains are used for recording transactions made with cryptocurrencies, such as Bitcoin, and have many other applications.
Each transaction added to a blockchain is validated by multiple computers on the Internet. These systems, which are configured to monitor specific types of blockchain transactions, form a peer-to-peer network.
They work together to ensure each transaction is valid before it is added to the blockchain. This decentralized network of computers ensures a single system cannot add invalid blocks to the chain. When a new block is added to a blockchain, it is linked to the previous block using a cryptographic hash generated from the contents of the previous block. This ensures the chain is never broken and that each block is permanently recorded. It is also intentionally difficult to alter past transactions in blockchain since all the subsequent blocks must be altered first.
The primary function of a blockchain is, therefore, to certify transactions between people. In the case of Bitcoin, the blockchain serves to verify the exchange of cryptocurrency between two users, but it is only one of the many possible uses of this technological structure. In other sectors, the blockchain can certify the exchange of shares and stocks, operate as if it were a notary and "validate" a contract or make the votes cast in online voting secure and impossible to alter.
One of the greatest advantages of the blockchain is the high degree of security it guarantees. In fact, once a transaction is certified and saved within one of the chain blocks, it can no longer be modified or tampered with. Each block consists of a pointer that connects it to the previous block, a timestamp that certifies the time at which the event actually took place and the transaction data.
These three elements ensure that each element of the blockchain is unique and immutable -- any request to modify the timestamp or the content of the block would change all subsequent blocks. This is because the pointer is created based on the data in the previous block, triggering a real chain reaction. In order for any alterations to happen, it would be necessary for the 50%-plus-one of the network to approve the change: a possible but hardly feasible operation, since the blockchain is distributed worldwide between millions of users.
Blockchain is a technology that has proven its own worth, but that doesn't mean it has been applied everywhere that it could be. Blockchain is an incredibly versatile tool. It's capable of touching a wide array of industries, each one very different from the others.
The blockchain has great potential. It makes available a huge amount of data immediately and safely, reducing expenses by reducing operational risks of errors and reconciliations and simplifying the information transmission system.
While blockchain is widely known for its use in cryptocurrencies such as Bitcoin, Litecoin, and Ether, the technology has several other uses. For example, it enables "smart contracts," which execute when certain conditions are met. This provides an automated escrow system for transactions between two parties. Blockchain can potentially be used to allow individuals to pay each other without a central clearing point. It has potential to greatly increase the efficiency of stock trading by allowing transactions to settle almost instantly instead of requiring three or more days for each transaction to clear.
Blockchain technology can also be used for non-financial purposes. For example, some digital signature platforms now use blockchain to record signatures and verify documents have been digitally signed. Blockchain can even be used to protect intellectual property by linking the distribution of content to the original source.