It is the underlying technology used to create, update and maintain a decentralised, trusted ledger of transactions which occur within a network. We can use this notion to define blockchain technology as a new answer to the question “how can I trust this data?”. Let’s use that idea as a starting point to understand the concept of what is blockchain technology.
This network is made up of independently owned nodes that use a cryptographic protocol to validate the transactions taking place. The protocol rewards accuracy in a way that ensures the data entered into the ledger cannot be wrong or subject to changes.
It is immutable, secure, and fully transparent.
The information kept on a blockchain is shared and maintained in a shared database. Think of it as a spreadsheet replicated across thousands of different computers, fully accessible to anyone, and without relying on a central server that can be hacked.
If you take a moment to think about how our economy is overwhelmingly dependent on the accurate storage and accessibility of information, you begin to understand the impact this technology can have on our world.
To find potential beneficiaries of this new system, look no further than established centuries-old industries such as banking, insurance, healthcare, and the legal system, among many others.
Let’s demystify a couple of things. When you hear the term “network of nodes”, just replace nodes with computers.
A blockchain is a database that exists in multiple computers which are part of the overall network charged with maintaining the accuracy of the data inputs. That’s another way of saying that these nodes are rewarded when they validate transactions that the rest of the network recognises as accurate.
Once validated, these blocks of information become part of the blockchain.
When the network validates a block of transactions, that block is permanently added to the blockchain, which as you recall is distributed across thousands of machines.
Once added, these records cannot be altered. As they are public and easily accessible, their immutability is a guarantor of trust in the whole network.
Users know the data can be trusted because it arises from a shared consensus, made possible by the decentralisation that ensures no single computer can override the rest of the network.
Blockchain technology makes it possible to trust the information kept on that database without relying on a central institution.
The hype that surrounds it comes from the fact that virtually our entire economy does, in fact, rely on centralised institutions which guarantee trust in the whole system. Blockchain effectively renders them redundant.
Blockchain technology can revolutionise the way businesses and governments operate, eradicating now unnecessary costs while making it easier for different parties to trust each other since they share a trust in the data the blockchain contains. Read more in our guide the history of blockchain technology