What is Blockchain?
A Blockchain is a database that puts information into groups called “blocks". When a block reaches its storage capacity, it is attached, or “chained”, to the previous block, forming a data chain called a “blockchain". This process repeats when any new information enters a newly formed block, which will likewise be added to the end of the chain, creating an unchangeable timeline of data, as each block is timestamped upon completion.
While all databases store large collections of information, one distinction between a traditional database and a blockchain is how the data is organized. Traditional databases house data in tables that allow for rapid scanning and filtering of information. Alternately, the intent of the blocks in a blockchain is to record digital information and distribute it, but not allow for it to be edited.
These extremely large databases are built utilizing thousands of computers, ensuring the volume of storage and computational power needed for multiple users to access the digital assets at the same time. The innovations of the internet now allow for new styles of distributed platforms to function in the cloud, outsourcing individual processes and efficiently storing information.
Any transactional information can be logged into a block, including transaction amount, time, date, and participants. Despite originating in the financial sector, with bitcoin being the initial real-world application, blockchains are not limited to currency transaction records. The ledger can also document and record units of commodity, property, votes, and rewards points, each asset being easily programmable and individually identifiable. Because of this, blockchain-based solutions now include cloud storage, payment processing, content distribution, and cybersecurity.
Blockchain solutions target sectors including security and privacy, digital identity, proof of work vs. proof of stake, scalability, and regulatory or legal constructs. Blockchain-based solutions also eliminate the need for banks, governments, accountants, and notaries to act as trusted third parties.
What are some real-world implementations of Blockchain?
- Transaction Ledgers- Blockchain does not keep data on a centralized ledger, as a traditional database does. Instead, is a type of distributed ledger, using several independent computers to document and synchronize transactions in multiple electronic ledgers. The bitcoin blockchain is a useful example of this, but credit card companies, financial institutions, and retail giants can use blockchain technology to record all transactions within their blockchain network.
- Transparency - Blockchains are stored on a public database, creating a chain of custody that is transparent and a binding record of events that cannot be tampered with.
- Product Inventories - Blockchain can also transparently and effectively employ end-to-end supply chain tracking. This decentralized, unchangeable ledger of every transaction enables the tracking of assets from creation to end-user.
- Elections - The very nature of blockchain eradicates the possibility of fraudulent voting. With timestamps and the decentralized database, falsifying information becomes much more challenging.
- Security - Once a block is added to the end of the blockchain, the contents cannot be amended or modified. Due to the distributed ledger technology, hackers are unable to alter a single copy of the chain and have it accepted. Additionally, permissioned blockchains limit access to only select participants, adding an additional level of security.
- Legal - Smart contracts run on a blockchain, which makes them unchangeable once agreed on by all parties and automatically executed without requiring a trusted third party. This allows for quicker and easier information sharing between mutually distrusting parties, as blockchain removes the need for mediation between parties.