By Aniket Bose. Edited by Arjun Chandrasekar.
Blockchain is a specific type of database and differs from a typical database, in the way it stores information. Blockchains store their data in blocks that are later chained together. As more data comes in, they are stored into new blocks. There is a variety of information that can be stored on a blockchain but it has mostly been used as a ledger for cryptocurrency transactions. For example in Bitcoin, blockchains are used in a decentralized manner, which makes it so that no single person or group has full control, instead, all users possess the same amount of control. Decentralized blockchains are immutable, which means that they are irreversible. For Bitcoin, this means that once a transaction is made, then they are permanently recorded and can be viewed by anyone.
What is Blockchain?
Blockchain seems very complex and definitely is in some aspects, but its core concept is very simple. A blockchain is a type of database and in order to understand blockchains, it’s important that we understand what databases are first. A database is a collection of information that is stored electronically on a computer system. The information and data that are stored in databases are usually formatted in a table format which allows for easier searching and filtering for specific data. Databases are specifically designed to store large amounts of information that can be accessed, filtered, and manipulated easily by any number of users at any time. Blockchains collect their information together in groups, which are also known as blocks. These blocks in blockchains have limited storage capacities and once those blocks are filled, they are chained onto the previous block, forming a chain of data known as the “blockchain”.
For cryptocurrencies, blockchains are specific types of databases that register each transaction that is made for each type of cryptocurrency. The computers that are used to store data for cryptocurrencies are not controlled by one group, instead, each computer is operated by a special group of individuals. The computers that are for developing cryptocurrency networks are called, “nodes”. In a blockchain, each node has a full record of the data that has been stored on the blockchain since its establishment. If there is one node that has an error in its data, then it can use the other nodes that are a part of the same blockchain, to correct its error as a reference point. If there is a user that tries to manipulate the nodes part of a cryptocurrency’s blockchain, then all of the other nodes in that blockchain would cross-check with each other and identify the node with false data.
Blockchains were first proposed as a research project in 1991. Blockchains are the reason that cryptocurrencies exist because they are the technology that allows them to exist. Blockchain technology was originally created for Bitcoin, but now it is used by a lot of different types of cryptocurrency. Consumers that use blockchain technology can complete their cryptocurrency transactions, without needing a legal authority to complete the transaction.