What is a Blockchain?

People use the term ‘blockchain technology’ to mean different things, and it can be confusing. Sometimes they are talking about The Bitcoin Blockchain, sometimes it’s other virtual currencies, sometimes it’s smart contracts. Most of the time though, they are talking about distributed ledgers, i.e. a list of transactions that is shared among a number of computers, rather than being stored on a central server.

The common themes seem to be a data store which:

  • Is replicated across a number of systems in almost real-time
  • Usually exists over a peer-to-peer network
  • Uses cryptography and digital signatures to prove identity, authenticity and enforce read/write access rights
  • Can be written by certain participants
  • Can be read by certain participants, a wider audience
  • Has mechanisms to make it hard to change historical records, or at least make it easy to detect when someone is trying to do so

The Blockchain is a transparent, public ledger system shared by all the nodes participating on the network. The first, largest, and most secure blockchain is currently the bitcoin blockchain, however there are over 700 public blockchains at the time of this writing. Every transaction that has ever taken place is recorded into the Blockchain (forever) and anyone can check it at anytime. This data is recorded on files called blocks, with each new block representing recent bitcoin transactions that have not yet been recorded. Think of it as a giant record book on the internet, that keeps tally of everyone’s bitcoin.

The blockchain is the heart of the Bitcoin protocol, with each 10 minute confirmation time forming Bitcoin’s heartbeat. Each confirmation cements recorded transactions with more and more strength as more blocks are built on top of them. This is why merchants wait sometimes for a certain number of “confirmations” before they complete a transaction, because each confirmation added makes it significantly harder for an attacker to successfully commit fraud.