What Is a Blockchain?
Blockchain is the underlying technology behind cryptocurrencies. A type of distributed ledger technology (DLT), blockchain is a database mechanism that facilitates the recording of transactions online. Information on a blockchain is encrypted and managed in a decentralised and trustless manner.
Some of blockchain’s key features include:
- Immutability — No hackers can modify the transaction records.
- Transparency — Anyone can see and verify the transactions on a blockchain via the internet.
- Decentralisation — No single entity can govern the whole network.
On a blockchain, information is stored in groups, known as ‘blocks’, each of which has its own unique identifier, or cryptographic ‘hash’. These blocks are then linked together, forming a chain. Hence the name ‘blockchain’.
Each block needs to be independently verified by peer-to-peer (P2P) computer networks before it can be added to the chain. Once the data is recorded in a block, it cannot be altered without having to change every subsequent block. This system helps to secure the blockchain against fraudulent activity and addresses the problem of ‘double-spending’.
Types of Blockchain
A public blockchain, as implied by its name, is entirely open to anyone, with full rights to download the code, use their devices as a node, and add blocks to the blockchain — given they fulfil the requirements.
Private blockchains are centralised systems governed by either an organisation or a group. Only these administrators have the authority to determine the participants within the network.
Permissioned blockchains have properties of both public and private blockchains. They are built to leverage blockchain technology without sacrificing the element of authority in a centralised system.