What’s a blockchain?

The term “blockchain” is gaining popularity, especially with the rising interest in cryptocurrencies. In short, a blockchain is a secure, distributed database where transactions between users are stored chronologically in the form of linked blocks. Here’s what you need to know.

No intermediaries
Imagine you’ve just given a cheque to a merchant, and the merchant then deposits it into their bank account. You’ve just used your bank as an intermediary. The bank will first check whether you have the necessary funds and then update the balance in your account.

If you decide to pay in cryptocurrency instead, you don’t need to use an intermediary. This type of currency is transferred directly from one person to another. But how can the merchant be sure you actually own the virtual currency you’re offering?

This is where blockchain technology comes in. Blockchain technology creates a decentralized computer register. The register is much like that of a bank, but it’s distributed among all users. Every time someone makes a withdrawal or deposit, the transaction is recorded in a file. When the file reaches a specific size, it forms a block. Subsequent transactions are recorded in a new file, and so on, generating a succession of interrelated blocks.

Secure digital signature
The best part about these data blocks is that they cannot be falsified. Each block has a digital signature, a mathematical validation formula that relies on the content in the current block and all preceding blocks in the series. Therefore, if anyone tries to alter even a digit in a previous transaction, they’ll change the digital signature and render the chain invalid, preventing any monetary exchange. Fascinating, isn’t it?