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What is Blockchain Technology?

What is Blockchain Technology?

Blockchain technology is a decentralized network structure used to obtain consensus on changes to a ledger shared and distributed throughout a system. Blockchain technology allows for peer-to-peer trust-less validation and record-keeping that is superior to centralized database systems in many situations, in terms of security, reliability, and efficiency.

Blockchains tend to be integrated with smart contract technology that serves as the mechanical-legal framework for interactions between the computers of interested parties when transfers of ownership rights, etc, are taking place on a distributed and shared ledger.  Much interest has been shown in blockchain technology by governments, institutions, and companies, but in the meantime, it is mostly the technology of the pioneering entrepreneurs of the world, technology enthusiasts, and investors looking to ride the wave of the ‘Next Big Thing.’ Bitcoin and other cryptocurrencies are built on blockchain technology. Possible applications include digital voting, digital rights for music and other intellectual property, supply chain and logistics smart contracts and many others.

In brief, a blockchain is a network of connected peer-level computers, meaning that, in the simplest and most ideal blockchain, there are no tiers or centralization of nodes that can exercise control over the network. A ledger of the history of work is kept by all computers on the network and cannot be changed. The work that the computers do is to process validations for the changes that will be made to the distributed ledger, and this work is done redundantly by many computers at once until a random computer solves the encryption of the block of data that needs verification.

Different blockchains are designed such that different amounts of time or work are required to solve a block, and the difficulty of the encryption in the blocks is automatically changed to maintain this average time-to-solve. Once completed, the information is added to the ledger and the next blocks are worked on. Because significant, redundant work is required to add to a blockchain ledger, and majority consensus is required for all changes, these systems are extremely difficult to hack when compared to their older cousins, centralized databases. There are versions of blockchains that do have tiers and permissions, but this is the simplest explanation for the way the majority of blockchains operate at the time of this writing.

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