Blockchain was the new vocabulary word for 2017. Constantly in the news, and on all of our lips, interest in blockchain dramatically increased over the past year, largely due to its association with cryptocurrency. This insight seeks to provide a broad introduction to this emerging technology.
Blockchain technology was first introduced in 2008 by an individual – or group – named Satoshi Nakamoto as a core element of Bitcoin, the first cryptocurrency. Very little is known about Satoshi Nakamoto, although there is speculation that the name is merely a pseudonym and that no such person exists.
A blockchain is a cryptographic, evolving chain of decentralized records that can detail a multitude of information.
These evolving chains of records are called blocks, and are linked together through cryptography. Cryptography is essentially the science of secure communication. The blocks memorialize transactions between parties over a peer-to-peer network, which cannot be altered post-transaction, creating a decentralized digital ledger.
By using a peer-to-peer network, a blockchain consists of a series of chronological entries recorded by a vast number of people, accessible by anyone. This is known as distributed ledger technology, which allows blockchain users to trace transactions, and eliminates the need for central independent recordkeeping.
The decentralized nature of records that are based on blockchain technology is what facilitates its security. As the blocks are linked together, the chain provides the foundation for future blocks. The diffusion of the blockchain over many computers in a peer-to-peer network makes records virtually unalterable because to do so would require the retroactive alteration of all preceding blocks in the chain.
Transparency is a key feature of a blockchain. It is an open and accessible record of previous transactions that can be accessed by anyone after the transactions have been verified. Blockchain is resistant to cyberattacks because of its broad network of users, lack of central point of vulnerability, and unalterable foundation.
Blockchain was originally used as a transaction ledger for Bitcoin, but its use has been widely expanded today and it is now widely regarded as a potentially foundational technology.
Not only are other cryptocurrencies using a blockchain to verify and record their transactions, but other commercial sectors are also realizing its advantages. Financial institutions, stock exchanges, the insurance industry, Internet of Things devices and commercial businesses are increasingly attracted to this new technology for its ability to create accessible, unalterable, secure and transparent records through distributed ledger technology.