What is Blockchain? - Simply explained
Blockchain is the underlying technology of Bitcoin and all other cryptocurrencies. It is, therefore, a piece of software or in other words a certain kind of database. The concept of a Blockchain was originally invented by Satoshi Nakamoto, with his launch of the open-source cryptocurrency Bitcoin. The special thing about this kind of database are its unique characteristics:
- A Blockchain is decentralized which means that data is not stored and secured on one central server but throughout the whole network and its users.
- Moreover Blockchain’s data is immutable. This is possible due to the connection of every Block with its previous data Blocks and additionally with all other data Blocks as well.
- Furthermore, all data Blocks are strongly encrypted through cryptographic processes and make the Blockchain even more secure.
- Last but not least a Blockchain cuts out the “middlemen”. Today, every monetary transaction has to be administrated by your local bank. Your bank guarantees secure transactions and make sure that your money will get removed from one balance an added to another one’s. The Blockchain automates this process through decentralization in a completely secure manner and offers borderless and immediate exchanges of values without any transaction costs generated through the presence of intermediaries and administrators. Additionally, you are actively lowering the risk of becoming a victim of data breaches, hacker attacks by using a Blockchain while major banks have often been the setting for massive losses of data in the past.
A Blockchain’s decentralization, the immutability of data and cryptographic security makes data immutable. This allows the establishment of virtual trust between transaction partners as all data in it is absolutely authentic.