What is Blockchain Technology?
As the name suggests, a blockchain is made of a linear chain of blocks and is responsible for keeping a permanent record of all confirmed transactions (and related data) - all secured by cryptography. Blockchain is basically an ever-growing list of records that are highly resistant to modification; these records are called blocks that are linked together using cryptography (codes). Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree). The timestamp proves that the transaction data existed when the block was published in order to get into its hash. As blocks each contain information about the block previous to it, they form a chain, with each additional block reinforcing the ones before it. Therefore, blockchains are resistant to modification of their data because once recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks.
Let us simplify this further:
Blockchain seems complicated, and it definitely can be, but its core concept is really quite simple. A blockchain is a type of database. To be able to understand blockchain, it is necessary to first understand what a database actually is.
What is a Database?
A database is a collection of information that is stored electronically on a computer system. Information, or data, in databases is typically structured in table format to allow for easier searching and filtering for specific information.
A blockchain is a list of data records that works as a decentralized digital database/ledger. The data is organized into blocks, which are chronologically arranged and secured by cryptography.
A blockchain is a special type of database. You may also have heard the term Distributed Ledger Technology (or DLT) – in many cases, they're referring to the same thing. A blockchain has certain unique properties. There are rules about how data can be added, and once the data has been stored, it's virtually impossible to modify or delete it.
Data is added over time in structures called blocks. Each block is built on top of the last and includes a piece of information that links back to the previous one. By looking at the most up-to-date block, we can check that it has been created after the last. So, if we continue all the way down the "chain," we'll reach our very first block – known as the genesis block.
In simple terms, once you make a transaction, it does not get automatically processed. It is first added to a block, and when a block is filled with transactions to its maximum capacity, the block is approved and the transaction data gets permanently added to the blockchain (digital passbook/ledger), i.e. the transaction gets approved and is completed.
The core points are:
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 most cases, 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.
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