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A blockchain is a public, distributed, decentralized digital ledger that records transactions across many computers. A blockchain is a spread database that maintains an ever-growing list of ordered records called blocks.” These blocks “are cryptographically linked. Each block contains a cryptographic hash of the previous block, timestamp, and transaction data. The record cannot be changed retrospectively without changing all subsequent blocks and the network consensus.

What is a blockchain used for?

A blockchain is a decentralized, distributed, and community digital archive that records transactions across many computers. The record cannot be changed retrospectively without changing all subsequent blocks and network consensus.

What are the business benefits of Blockchain?

The main use of the Blockchain is as a database to record transactions, but its benefits go far outside those of a traditional database. Most importantly, it eliminates the possibility of manipulation by a malicious actor and provides the following business benefits:

  • Time-saving. Transaction processing is faster because there is no need for verification by a central authority. Blockchain reduces transaction times from days to minutes.
  • Savings measures. Transactions require less oversight. Participants can directly exchange their valuables. Blockchain eliminates duplicates because participants have access to a shared ledger.
  • Tighter security. Blockchain security features protect against tampering, fraud, and cybercrime.

The Blockchain explained

As described in Blockchain for Dummies, “Blockchain gets its name from the way it stores transaction data – in blocks linked together to form a chain. Blockchain grows with the number of transactions. Blocks record and confirm the timing and sequence of transactions, which are then recorded on the Blockchain, within a separate network governed by rules agreed upon by network participants.

“Each block contains a hash (a hash or unique identifier), timestamped batches of recent valid transactions, and the previous block’s hash. The previous block hash links blocks together and prevents a block from being modified, or a block is inserted between two existing blocks.” In theory, the method makes the blockchain tamper-proof.

The four key concepts behind Blockchain are:

  • Common Ledger. A shared ledger is a distributed “add-only” system of records shared across a corporate network. “With a shared ledger, transactions are only recorded once, eliminating the duplication of effort typical of traditional business networks.”
  • Permissions. Authorizations ensure that transactions are secure, authenticated, and verifiable. “With the ability to restrict network participation, organizations can more easily comply with privacy regulations such as those drew in the Health Insurance Portability and Responsibility Act (HIPAA) and the General Data Protection Regulation. (GDPR) of the EU.
  • Smart contracts. A smart contract is an agreement or set of guidelines that direct a business transaction; It is stored on the Blockchain and performed automatically as part of a transaction.
  • Consensus. By consensus, all parties to the transaction verified by the network agree. Blockchains feature various consensus mechanisms, including proof-of-stake, multisignature, and PBFT (Practical Byzantine Fault Tolerance).

Each blockchain network has different participants who take on these roles, among others:

  • Blockchain users. Participants (usually business users) can join the blockchain network and transact with other network participants.
  • Regulatory authorities. Blockchain users with special permissions to monitor transactions within the network.
  • Blockchain network operators. People with special privileges and powers define, create, manage and monitor the blockchain network.
  • Certificate Authorities. The people who issue and manage the different types of certificates required to run a trusted blockchain.

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