What is blockchain?
If you read fintech news regularly, you definitely know ‘blockchain’ is the hot topic in the fintech industry and is placed in news headlines very often. So, what is blockchain?
In one sentence, blockchain is the core technology behind bitcoin. If you read all my articles related to bitcoin, you find that I have never mentioned blockchain before. The main reason is that I don’t want to scare away readers because of the technical terms. However, I have explained blockchain partially in the ‘What is bitcoin mining?’ article. Do you still remember?
A block is a dataset including a collection of transactions within a certain time period and timestamp. All blocks are arranged in chronological order where each block is linked with the previous one by a cryptographic function called hash. This function greatly increases the cost for attackers to alter the record as huge amount of computation power is needed to compute the hash. (Please refer to What is bitcoin mining?) If the record is modified without a correct hash, other nodes must know it. To further increase the immutability and reliability of the data, the blockchain is stored in the distributed network. If a malicious actor tries to alter the transaction data in the block and claims he owns more bitcoin than he actually possesses, he still cannot spend those bitcoins unless he can change the record stored in all nodes which is almost impossible. Thus, records are immutable once they are added into the blockchain. For reliability, the distributed network can prevent the single point of failure because every single node stores the same version of blockchain which allows every node to operate independently. Even 99% of the nodes are destroyed, the network can still run properly.
To conclude, blockchain is a database initially adopted by the bitcoin system which can ensure high immutability and reliability of data with the distributed network.
