A blockchain is a digital database capable of storing transaction records in a secure, irreversible, and decentralized manner.
Blockchain technology allows data to be entered and distributed in a permanent, irreversible way. Think of a blockchain like piece of paper that records transactions — now imagine if you can only add content to the page, and there’s no option to edit or remove content. Once each page is filled up, another page appears and gets stapled to the existing pages, forming a chain of pages.
Similarly, blockchains organize data into blocks. When a block is filled with data, a new block is created and irreversibly linked to the existing block(s), creating a permanent and unchangeable database of records. In addition to centralized blockchains, there are decentralized blockchains that allow any eligible participant to access or add to the blockchain.
How Does Blockchain Technology Work?
Early concepts for blockchain technology have existed since the 1980s, but blockchain as we know it today was introduced by the individual or group known as Satoshi Nakamoto. Bitcoin (BTC), widely regarded as the first modern cryptocurrency, also popularized the decentralized blockchain, which stores blockchain data across a decentralized network of computing devices, thus removing any single point of failure.
What Are The Advantages of Blockchain Technology?
Decentralized blockchains share the following positive characteristics:
- Increased transparency. Sufficiently decentralized blockchains feature no central authority, instead relying on a peer-to-peer network of computing devices to verify transactions. In addition, many blockchains are open-source, allowing anyone to view their source code.
- Enhanced security. Blockchain data cannot be edited, removed, or manipulated without consensus from the majority of the network. Therefore, transactions cannot be duplicated, reversed, or deleted.
- Improved speed and efficiency. Data can be added, stored, and moved on the blockchain in a way that’s publicly verifiable — thus removing some intermediaries from the equation. Furthermore, smart contracts, or self-executing code stored on the blockchain can automatically execute, verify, or enforce agreements between parties.
- Unrivaled traceability. Once data is added to a blockchain, it will remain there permanently as a proof-of-record, making blockchain technology a great candidate for improving supply chain traceability.
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