Have you heard the term blockchain and ever wondered just what it means? You will often hear blockchain raised in conversations surrounding cryptocurrencies, like Bitcoin, as well as the banking and investment sector. However, it is also being utilised in industries such as e-commerce, energy, trade and supply chains, property and the media.
In a nutshell, the blockchain is essentially a computerised record of exchanges or transactions. These are copied and disseminated throughout an entire system of computer frameworks. Each ‘block’ in the ‘chain’ contains various exchanges, and each time another exchange happens on the blockchain, a record of that exchange is added to each member’s record. This is what makes information recorded in a blockchain so hard to falsify or change.
A blockchain can be programmed so that all records are individually encrypted and the identity of participants is either anonymous or pseudonymous. All network participants have a copy of the records for complete transparency and any validated records are irreversible and cannot be changed. A transaction timestamp is recorded on a block in real-time which means that it cannot be backdated, and all network participants agree to the validity of each record.
Each block contains data, a hash of the block and hash of the previous block. The data that is stored depends on the type of the blockchain. The bitcoin blockchain, for example, stores the details of a transaction such as the sender, receiver and amount of cash. The hash can be equated to a fingerprint; it identifies a block and all of its contents and is always unique to every block just like a fingerprint. Changing something inside the block therefore changes the hash. The hash of the previous block creates a chain of blocks making it very secure and hard to tamper with. The hash of the previous block must match up with the current hash of the block before it, making it a chain of blocks. This is where we get the term ‘blockchain’.