In previous posts we mentioned blockchain, but never actually explained what it means and how it works. Today we’ll explain the basics and will be explaining further in future posts.
Blockchain can be compared to a digital ledger, where information about all transactions is kept. And as you can guess from the name, it’s a chain of blocks where each block contains a number of transactions.
Why is blockchain so popular?
First of all, it’s decentralised, so nobody is in charge, it’s run by its users and the system is called Distributed Ledger Technology.
Next, it’s because of its security, which includes several factors.
First and foremost, even though it’s open to everyone, once data has been recorded inside blockchain, it’s very difficult if not impossible to change it.
How can it be? Well, when a transaction is recorded in a block, it becomes ‘signed’ with an immutable cryptographic signature called ‘hash’. So if one block in a chain was changed, the signature (hash) will immediately show if someone had tampered with the information. Each block contains two hashes – one from the block itself and the other one from the block preceding it. This way blocks point at each other and create a chain. The more blocks in the chain, the more secure the ledger is.
Additionally, blockchains are distributed and unanimous. Meaning that all network participants have a copy of the ledger for complete transparency and all participants agree and verify the validity each of the records.
No wonder that blockchain technology is not limited to just cryptocurrency, but is slowly entering other areas of business. In our future posts we’ll look at how the information is recorded in blockchain and what future applications of blockchain are. Stay tuned!