A blockchain can be described as a data structure that holds transactional records while ensuring security, transparency, and decentralization.
Some people think of a blockchain as a chain or records stored in the forms of blocks which are controlled by no single authority.
You can also think of a blockchain as a decentralized ledger of all transactions across a peer-to-peer network. Using this technology, participants can confirm transactions without a need for a central clearing authority. Potential applications can include fund transfers, settling trades, voting, and many other issues.
Blockchain is the technology that enables the existence of cryptocurrency among other things. Bitcoin is the name of the best-known cryptocurrency, the one for which blockchain technology was invented. A cryptocurrency is a medium of exchange, such as the U.S. dollar, but is digital and uses encryption techniques to control the creation of monetary units and to verify the transfer of funds.
Every chain consists of multiple blocks and each block has three basic elements:
- The data in the block.
- A 32-bit whole number called a nonce. The nonce is randomly generated when a block is created, which then generates a block header hash.
- The hash is a 256-bit number wedded to the nonce. It must start with a huge number of zeros (i.e., be extremely small).
From a business perspective, it’s helpful to think of blockchain technology as a type of next-generation business process improvement software. Collaborative technology, such as blockchain, promises the ability to improve the business processes that occur between companies, radically lowering the “cost of trust.”
Many see blockchains as an especially promising and revolutionary technology because it helps reduce risk, stamps out fraud and brings transparency in a scaleable way for myriad uses.
Financial institutions are exploring how they could also use blockchain technology to upend everything from clearing and settlement to insurance.
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