Learn more about what a Blockchain is in business.
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The definition of blockchain can mean either a type of database shared among different nodes of a computer network or the technology that drives this system. As a database, a blockchain stores “blocks” of information in digital format. Blockchain technology is the concept behind running the blockchain database.
Blockchain technology makes cryptocurrencies like Bitcoin work. A blockchain collects information about transactions into groups known as blocks. Blocks can hold only a certain amount of information. When a block is filled, it’s closed and then linked to the block that was closed before it. This forms a chain of closed blocks of information, giving us the meaning of blockchain.
One of blockchain’s benefits is that it’s an immutable database. This means that once information is stored in a block, it can’t be changed by any user. This feature isn’t only a benefit of blockchain, it’s central to blockchain’s definition and purpose.
Some of the goals in the creation of blockchain were to allow decentralized digital information to be recorded and distributed but not edited. Blockchain technology serves as a foundation for immutable ledgers. Blockchain allows this to happen in both a linear and decentralized manner.
Linear blocks are a key blockchain advantage over other kinds of transactional recordkeeping. In one blockchain example, blocks on the Bitcoin blockchain consist of an average of more than 500 Bitcoin transactions. Each block on the Bitcoin blockchain is dependent upon and linked to the information in a previous block. Over time, this forms a chain of transactions that no one can alter.
Another blockchain benefit is to allow data to be spread out among several network nodes. For network administrators concerned about single points of failure, this blockchain advantage creates redundancy. If somebody tries to alter a record at one point on or instance of the chain, the other nodes or blocks wouldn’t be altered. If someone tries to change information at any node of the blockchain, all other nodes would cross-reference each other. This is how blockchain technology can easily identify a node containing incorrect information.
These decentralized features create a network where the information and history of transactions recorded on blockchain are immutable. They can’t be altered.
It’s important to note that while we typically think of blockchain technology as being only a ledger for cryptocurrency transactions, it does have other purposes. It can be used to hold information like important legal contracts or identity documents, or even trade secrets and inventory lists. There are many future possibilities for blockchain technology.
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Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.