The blockchain is the underlying technology that powers cryptocurrencies. It is a decentralized database or digital “ledger” of transactions across a peer-to-peer network of computers or “nodes” that use the underlying infrastructure of the Internet to validate and process valuable transactions.
While using the blockchain, participants can transfer information across the Internet without the need of a central third party. In a financial transaction, the buyer and seller interact directly without needing verification by a trusted third-party intermediary.
The actual record of transaction is pseudonymous, but the identifying information is encrypted, preventing personal information from being shared.
In order to validate a transaction, the network of nodes must verify and approve the information before the transaction is added to “blocks” of data.
Blockchain uses a cryptography system to attach new blocks of data to previous blocks. This prevents blocks from being overwritten or destroyed, but blocks can be added, which in turn forms a chain of blocks, or a “blockchain.” This chain of blocks is synchronized across the network by providing an economic incentive to the nodes that are first able to verify the data and add the blocks to the chain by solving a complex mathematical task.
Every node on the blockchain maintains the same chain of blocks, or ledger. This ledger of records is distributed across various nodes that can verify the state of the ledger is correct through the process of consensus. Once a block has been added to the blockchain, it becomes an immutable record.
Blockchain technology has the potential to positively disrupt most industries since it can work for almost every type of transaction that involves value, including money, property and goods. From a business perspective, the technology can be leveraged for process improvement, helping to reduce human error, prevent fraud and streamline data storage.
Financial organizations could use the blockchain to store any records digitally and can leverage the technology for any type of transaction that currently needs to be verified by a trusted third party.
These transactions may include transferring digital or physical assets, verifying chain of custody and protecting intellectual property. In an era with increasing cybercrime and strict regulatory requirements, blockchain offers a highly fraud resistant technology that can protect and authenticate almost any type of transaction, having a revolutionary global impact.