Blockchain is a type of database made up of a growing list of records, individually referred to as blocks, that are chained together using computer cryptography. The goal of the blockchain is to enable the collection and distribution of non-manipulable digital information. Unlike a typical database, where data is electronically stored in a “table format”, data is stored within a blockchain in its connected blocks, with each block containing information about the previous block. It is this property that creates resistance to changing the data on a blockchain, since changing the information on a block would require changing all subsequently created blocks. And although blockchains are not completely immutable, as a collectively agreed update in the network can be referred to as a “fork”, blockchains are designed in such a way that they are fundamentally secure.
Blockchains are generally managed through a network of peer-to-peer computers that work together to serve as a publicly distributed record of data (or transactions). Each node in the network follows a specific protocol that the entire blockchain adheres to to validate new blocks and communicate with each other.
What does blockchain have to do with cryptocurrencies?
Although blockchain appears in almost every conversation with cryptocurrencies, the two terms cannot be used interchangeably, but blockchain is the network and platform through which the transaction is carried out and the cryptocurrency is generated. For example, the ether (ETH-USD) cryptocurrency operates through the ethereum blockchain.
Blockchain technology was debated in the academic literature for nearly two decades before cryptocurrencies like Bitcoin (BTCUSD) and ether, the two largest by market cap, — with cryptocurrencies becoming one of the first and most widely known applications of blockchain. In 2009, an individual or group of people using the pseudonym “Satoshi Nakamoto” invented the first cryptocurrency on the Bitcoin blockchain, which serves as the public ledger for Bitcoin transactions.
One of the most important solutions that a digital currency offers through blockchain technology is the answer to the double spending problem. In addition, it offers this solution with all its functions without the need for a central authority or a reliable server as mentioned above. Since a blockchain network consists of computing nodes that can be located anywhere in the world, blockchains and thus cryptocurrencies work as fully decentralized platforms.
The decentralization, along with the pseudo-anonymity that cryptocurrency offers as a means of saving and paying, as cryptocurrency wallets do not require verification, as is so popular and controversial. The advantages that blockchain offers as a currency platform include 24/7 operation, 365 days, market-driven transaction fees, speed, security and easy access.
Other blockchain applications
Although cryptocurrency is undoubtedly the most well-known application of the blockchain, blockchain technology can also be used for many other practical applications. For example, the banking and finance industry could benefit greatly from the speed, security and lack of operating hours of the blockchain. Areas of society and businesses that could benefit from using this technology include federal currencies, the healthcare industry, supply chains, and even democratic elections, each of which could reap any or all of the above benefits that blockchain previously has to offer.
