Blockchain Basics

What is a blockchain?

A blockchain is a specific type of database, with a digital ever-growing list of data points connected to one another, which act as a decentralized public ledger.
The data that is added over time are structures called blocks. Blocks build one on top of another in chronological order and include a piece of information that links the data block to the previous block, creating a chain all the way back to the genesis block (the first block). Blockchain is the core underlying component of cryptocurrencies. The reason blockchain is considered one of the most disruptive technologies is its decentralized, ie. trustless, nature, that the truth of a state (facts, data, financial balances) is kept and maintained without relying on a centralized third party (centralized databases, financial institutions, authorities).

What’s unique about a blockchain?

Blockchains run on decentralized networks meaning that transactions on the block are recorded across many computers world wide to ensure that the data cannot be altered. If the data was altered it would retroactively alter all subsequent blocks through a cryptographic function called hashing.
Blockchains utilize a trustless system, meaning that users involved do not need to know or trust each other or a third party for the system to function. In a trustless system, no single entity has authority over the system.
Accessibility is one of the biggest differentiators for blockchain, allowing any person with an internet connection to have access to the market without any identification barriers that some may face in a centralized financial institution. This makes it much easier for two parties to exchange funds without the need for a trusted third party like a bank.
The transparency of cryptocurrencies and blockchain benefits both the regulators and companies; it simplifies and improves the auditing process for enterprises and provides a permanent record of all transactions. Anybody can gain access to all transactional data from a blockchain.
Lastly, self sovereignty is a distinct property in crypto. It means full ownership and control over things that belong to you, be it data or money. In the traditional world, we are used to counting on third party softwares to store and control our data, and we rely on third party intermediaries such as banks to access our savings. But in crypto, the underlying blockchain technology is built to give full sovereignty to the individuals; hence, the popular meme “Be your own bank”.
Last modified 2mo ago