What is Blockchain Technology?

The Blockchain is an undeniably ingenious invention. By allowing digital information to be distributed but not copied, Blockchain technology created the backbone of a new type of internet. The Blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.

Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the Blockchain. Information held on a Blockchain exists as a shared — and continually reconciled — database. This is a way of using the network that has obvious benefits. The Blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet.

Blockchain technology is like the internet in that it has a built-in robustness. By storing blocks of information that are identical across its network, the Blockchain cannot: Be controlled by any single entity and has no single point of failure. Bitcoin was invented in 2008. Since that time, the Bitcoin Blockchain has operated without significant disruption. The Blockchain network lives in a state of consensus, one that automatically checks in with itself every ten minutes.  A kind of self-auditing ecosystem of a digital value, the network reconciles every transaction that happens in ten-minute intervals. Each group of these transactions is referred to as a “block”. Two important properties result from this: Transparency and it cannot be corrupted.

By storing data across its network, the Blockchain eliminates the risks that come with data being held centrally. Its network lacks centralized points of vulnerability that computer hackers can exploit. Today’s internet has security problems that are familiar to everyone. We all rely on the “username/password” system to protect our identity and assets online. Blockchain security methods use encryption technology. The basis for this is the so-called public and private “keys”. A “public key” is a users’ address on the Blockchain. Bitcoins sent across the network gets recorded as belonging to that address. The “private key” is like a password that gives its owner access to their Bitcoin or other digital assets. Store your data on the Blockchain and it is incorruptible.

With Blockchain technology, the web gains a new layer of functionality. Already, users can transact directly with one another — Bitcoin transactions in 2016 averaged over $200,000 US per day. With the added security brought by the Blockchain new internet business are on track to unbundle the traditional institutions of finance. Goldman Sachs believes that Blockchain technology holds great potential especially to optimize clearing and settlements, and could represent global savings of up to $6bn per year.