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Demystifying blockchain: How does blockchain technology work?

Blockchains can be used to make data in any industry immutable—the term used to describe the inability to be altered.

AuthorBTW Editorial

Reading Time3 min

PublishedMay 22, 2024

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Headline

Blockchains can be used to make data in any industry immutable—the term used to describe the inability to be altered.

Context

A blockchain is a distributed database or ledger shared among a computer network ‘s nodes. They are best known for their crucial role in cryptocurrency systems for maintaining a secure and decentralised record of transactions, but they are not limited to cryptocurrency uses. Blockchains can be used to make data in any industry immutable—the term used to describe the inability to be altered. Because there is no way to change a block, the only trust needed is at the point where a user or program enters data. This aspect reduces the need for trusted third parties, which are usually auditors or other humans that add costs and make mistakes.

Evidence

Pending intelligence enrichment.

Analysis

Since Bitcoin’s introduction in 2009, blockchain uses have exploded via the creation of various cryptocurrencies, decentralised finance ( DeFi ) applications, non-fungible tokens ( NFTs ), and smart contracts. Also read: How do AI and blockchain work together? At its core, blockchain is a decentralised, distributed ledger technology that enables the secure and transparent recording of transactions across a network of computers. Unlike traditional centralised systems where data is stored in a single location controlled by a central authority, blockchain distributes data across multiple nodes, ensuring that no single entity has control over the entire network. Also read: What is the difference between fintech and blockchain?

Key Points

Blockchain is a type of shared database that differs from a typical database in the way it stores information; blockchains store data in blocks linked together via cryptography.
Different types of information can be stored on a blockchain, but the most common use for transactions has been as a ledger. In Bitcoin’s case, blockchain is decentralised so that no single person or group has control—instead, all users collectively retain control.
Decentralised blockchains are immutable, which means that the data entered is irreversible. For Bitcoin, transactions are permanently recorded and viewable to anyone.