What is Blockchain?
A blockchain is a digital ledger of transactions that is replicated and distributed across an entire network of computer systems on the blockchain. Each block in the chain holds several recorded contracts (i.e., transactions), and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s record. The decentralized database managed by multiple participants is known as **Distributed Ledger Technology (or DLT)**. And Blockchain is a type of DLT in which, transactions are recorded with an unchangeable cryptographical signature – that is called a hash.
Now, what is a Hash? Well, it’s an unchangeable cryptographical signature. Hash is a function that converts an input of letters and numbers into an encrypted output of a fixed length. A hash is created using an algorithm, and is essential to the blockchain’s management of digital currencies.
And because of that, it impossible to manipulate, hack, or cheat the system.
This means if one block in one chain was altered, it would be immediately apparent it had been manipulated. If hackers attempted to distort a blockchain system, they would have to change every block in the chain, across all the distributed versions of the chain.
Blockchains such as Bitcoin and Ethereum are constantly and continually growing as blocks are being added to the chain, which significantly adds to the security of the ledger.
Why blockchain is important: Business runs on information. The faster it’s received and the more accurate it is, the better.
There have been many attempts to produce digital currency in the past, but they have always failed until the arrival of the blockchain technology.
The fundamental challenge has always been trust. If someone creates a new currency, how can you trust that they won’t give themselves a million dollars, or steal your dollars for themselves?
Bitcoin was designed to solve this problem by using a specific type of database called a blockchain. Most normal databases, have someone in charge who can alter the entries. But blockchain is different because nobody is in charge; it’s run by the people who use it, And because members share a single view of the truth, you can see all details of a transaction end to end, giving you greater confidence, as well as new efficiencies and opportunities.
What’s more, bitcoins can’t be faked, hacked or double spent – so people that own this money can trust that it has some value.
**There are three key elements in 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.