What is Blockchain?

  • Blockchain is a specific type of database.
  • It differs from a typical database in the way it stores information; blockchains store data in blocks that are then chained together.
  • As new data comes in it is entered into a fresh block. Once the block is filled with data it is chained onto the previous block, which makes the data chained together in chronological order.
  • Different types of information can be stored on a blockchain but the most common use so far has been as a ledger for transactions.
  • In Bitcoin's case, blockchain is used in a decentralized way so that no single person or group has control—rather, all users collectively retain control.
  • Decentralized blockchains are immutable, which means that the data entered is irreversible. For Bitcoin, this means that transactions are permanently recorded and viewable to anyone.

Key elements of a blockchain

Distributed ledger technology

All network participants have access to the distributed ledger and its immutable record of transactions. With this shared ledger, transactions are recorded only once, eliminating the duplication of effort that's typical of traditional business networks.

Immutable records

No participant can change or tamper with a transaction after it's been recorded to the shared ledger. If a transaction record includes an error, a new transaction must be added to reverse the error, and both transactions are then visible.

Smart contracts

To speed transactions, a set of rules — called a smart contract — is stored on the blockchain and executed automatically. A smart contract can define conditions for corporate bond transfers, include terms for travel insurance to be paid and much more.

How blockchain works

Notebook computer connected to a transaction network

As each transaction occurs, it is recorded as a "block" of data

Those transactions show the movement of an asset that can be tangible (a product) or intangible (intellectual). The data block can record the information of your choice: who, what, when, where, how much and even the condition — such as the temperature of a food shipment.

Woman floating white touches an abstract block of information

Each block is connected to the ones before and after it

These blocks form a chain of data as an asset moves from place to place or ownership changes hands. The blocks confirm the exact time and sequence of transactions, and the blocks link securely together to prevent any block from being altered or a block being inserted between two existing blocks.

Man inside of a system core adjusting settings

Transactions are blocked together in an irreversible chain: a blockchain

Each additional block strengthens the verification of the previous block and hence the entire blockchain. This renders the blockchain tamper-evident, delivering the key strength of immutability. This removes the possibility of tampering by a malicious actor — and builds a ledger of transactions you and other network members can trust.

Benefits of blockchain

What needs to change: Operations often waste effort on duplicate record keeping and third-party validations. Record-keeping systems can be vulnerable to fraud and cyberattacks. Limited transparency can slow data verification. And with the arrival of IoT, transaction volumes have exploded. All of this slows business, drains the bottom line — and means we need a better way. Enter blockchain.

A digital security station

Greater trust

With blockchain, as a member of a members-only network, you can rest assured that you are receiving accurate and timely data, and that your confidential blockchain records will be shared only with network members to whom you have specifically granted access.

IT worker inputting on a tablet PC

Greater security

Consensus on data accuracy is required from all network members, and all validated transactions are immutable because they are recorded permanently. No one, not even a system administrator, can delete a transaction.

Man working on a tablet PC with a stylus

More efficiencies

With a distributed ledger that is shared among members of a network, time-wasting record reconciliations are eliminated. And to speed transactions, a set of rules — called a smart contract — can be stored on the blockchain and executed automatically.

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