What Is a Blockchain?

A blockchain is a distributed database that is shared among the nodes of a computer network.

As a database, a blockchain stores information electronically in digital format. Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin, for maintaining a secure and decentralized record of transactions.

One key difference between a typical database and a blockchain is how the data is structured. A blockchain collects information together in groups, known as blocks, that hold sets of information. Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block, forming a chain of data known as the blockchain. All new information that follows that freshly added block is compiled into a newly formed block that will then also be added to the chain once filled.

A database usually structures its data into tables, whereas a blockchain, as its name implies, structures its data into chunks (blocks) that are strung together. This data structure inherently makes an irreversible timeline of data when implemented in a decentralized nature. When a block is filled, it is set in stone and becomes a part of this timeline. Each block in the chain is given an exact timestamp when it is added to the chain.

How Does a Blockchain Work?

The goal of blockchain is to allow digital information to be recorded and distributed, but not edited. In this way, a blockchain is a foundation for immutable ledgers, or records of transactions that cannot be altered, deleted, or destroyed. This is why blockchains are also known as distributed ledger technology (DLT).

Distributed Ledger Technology (DLT) Explained

Distributed Ledger Technology (DLT) is a protocol that enables the secure functioning of a decentralized digital database. Distributed networks eliminate the need for a central authority to keep a check against manipulation.

DLT allows for the storage of all information in a secure and accurate manner using cryptography. The same can be accessed using "keys" and cryptographic signatures. Once the information is stored, it becomes an immutable database and is governed by the rules of the network.

The very nature of a decentralized ledger makes them immune to a cyber-crime, as all the copies stored across the network need to be attacked at the same time for the attack to be successful. Additionally, the simultaneous (peer-to-peer) sharing and updating of records make the whole process much faster, more effective, and cheaper.