What is Blockchain Technology?
Blockchain technology refers to a revolutionary new way of organizing and storing data. Blockchains make it possible for independent networks to share knowledge in a way that is transparent and verifiable. Best known as the code behind cryptocurrencies such as Bitcoin, blockchain has been referred to as the "fifth evolution" in computing, rapidly under adoption by many industries across the globe.
A blockchain is a decentralized ledger that keeps a substantiated chronological record of all transactions. For example, when using this technology to manage money transfers, the ledger would look similar to a bank statement, documenting dollar amounts, dates, senders and receivers. The data structure incorporates cryptography, which allows every member of the network to manage the ledger safely without centralized enforcement. This lack of central authority within the system is one of the most influential innovations of blockchain technology.
Once information is recorded within the blockchain, it becomes permanent and unfeasible to change or delete. If a user wants to make a new entry to the ledger, known as a block, other users in the network must verify the proposed information. Each computer on the network, referred to as a "node," compares the submitted information against the existing ledger of transactions. If a majority of the nodes can authenticate the accuracy of the new information block, it is allowed to become part of the permanent ledger. Since blockchain networks are made up of computers in multiple locations, corrupting the entire network at once is nearly impossible.
Understanding Blockchain Technology
To understand how blockchain technology works, it is helpful to know the type of data that makes up each block. In addition to transaction data, all blocks contain a digital fingerprint known as the hash. Each unique hash is generated based on information within the block, so if the data becomes altered in any way, the hash will automatically change. This cryptography is the key to the decentralized authority of blockchains. A new block also contains an imprint of the hash assigned to the previous block, auditing the ongoing chain of entries. If a user attempts to tamper with block data, the hash cannot be authenticated and the entry will be rejected.
Now that verifiable digital ledgers are possible, businesses today can operate in a way that was not conceivable in the past. In a global marketplace, blockchain technology ensures that digital data can be fully trusted. Already embraced by the financial community, the uses for this technology in every sector, from supply chain tracking to democratic voting systems, is limitless.