The Technology Behind Blockchain
Blockchain is a form of financial service using cryptocurrency — essentially a means of taking in information and encrypting it against being hacked, altered or maliciously duplicated. One of the more famous examples of Blockchain is Bitcoin, which the company began exploring in 2011. Blockchain is a form of DLT or Distributed Ledger Technology (unfortunately nothing involving lettuce and tomatoes).
As a concept, cryptocurrency is amassed data used as an economic medium of exchange for goods and services. Digital dollars! Where physical representations of wealth (bills, coins) once existed as a means of exchange, cryptocurrency uses well-secured binary tokens. In the case of Bitcoin for example, the owner of a unit (“coin”) has said ownership stored on a digital ledger. Strong cryptography protects this ownership as well as transfers of funds between owners and the creation of new tokens in the economy.
Distributed Ledger Technology
A Distributed Ledger is a synchronized system of data entries that works concurrently across many databases and and machines. Each time an entry is made on the ledger, it is copied to each individual ledger held by every user and their device or “node.” These individual ledgers are decentralized, meaning that the database is managed by a myriad of contributors rather than being controlled singularly by one person or organization. DLTs are defined by many features: they are very secure, the participants are anonymous, all participants agree on the integrity of each entry, transactions are irreversible and timestamped, and as stated before, all contributors have a copy of the ledger to ensure complete transparency within the system.
Blockchain has succeeded where other digital exchange technologies have failed because it ensures that each unit of exchange is secure — a unit’s value cannot be altered by an owners’s malicious attempts to inflate the system with their own fabricated units or stolen from other owners. Because of the features of DLTs, security, anonymity, decentralized integrity of value, and concurrent ledger updates across each users’ devices, any attempts to falsify the ledger and cheat the system would be immediately apparent. If hackerss attempted to tamper with one “block” in the chain, they would have to alter every other block or transaction, every iteration of the ledger, in the ledgers’ history across all users’ copy of the ledger. Because of this, each additional block in the chain increases the security of the currency.
Sources and Further Reading
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