What is Blockchain?
Principally, the definition of Blockchain can be confined down into the two words that make its name, ‘block’ and ‘chain’.
Firstly, the ‘block’ in this instance is the digital information of transactions. Transactional information stored in blocks includes the date, time, money ($) amount along with the participants and the individual unique code (‘hash’) of each block. However, a block isn’t just one singular transaction, often a block can store up to 1 MB of data meaning thousands of transactions can be encompassed under one block.
Secondly, the ‘chain’ is the decentralized public data base which stores the blocks and its corresponding digital information. Therefore, the blockchain is a public digital ledger showing the unchangeable, and immutable transactions called ‘hash’ creating a unique code that ties each block to the next block in the chain. Meaning if a block was to be changed it would be immediately be apparent, thus the number of hackers in blockchain is minuscule and security of transactions is very high with all records being individually encrypted.
How does Blockchain work?
Essentially, Blockchain operates in 4 key steps
- The first step is the initial request of a transaction occurring. For example, a purchase on Amazon, eBay, cryptocurrency etc triggers a starting block to the blockchain technology.
- Secondly, these transactions get verified, confirming the details of the purchase through the P2P (peer-to-peer) networking system of computers known as nodes.
- Once the transaction time, participants, digital signature and other details are verified, this transaction can then combine with other verified transactions creating a new block of data for the ledger (records).
- Lastly, this new block is added to the existing blockchain, with a unique hash/code. The block is now permanent on the database and is part of the unalterable, immutable blockchain technology.
Blockchains: Public vs Private
Public blockchain ledgers can be operated autonomously as a peer-to – peer network, combined with a centralized time-stamping server to share information between parties. An administrator is no requirement. The users of the blockchain are in fact the administrator.
A separate type of blockchain, known as private or authorized blockchain, enables businesses to build and centrally manage their own transactional networks which can be used with inter- or intra-company with partners.
Blockchain updates tend to occur despite being less frequent and happening with less fanfare than they did a few years ago. Today, blockchain technology has the ability to push the financial services sector into a drastically different technological future.