Blockchain is a distributed, digital, public ledger that can record transactions and track the movement of assets between parties without a central clearing authority. All network participants have access to the distributed ledger and its immutable record of transactions, and there are no administrators—meaning that decision-making is fully decentralized, making it incredibly difficult to hack. Hacking a single node, or even dozens of nodes, won’t enable a malicious actor to alter the ledger.
Here’s how it works: Each requested transaction is broadcasted to a peer-to-peer network of nodes (or computers), which validates the transaction and the user’s status using cryptographic algorithms. Each completed transaction is recorded as a “block” of data, which is then connected to the ones before in a permanent, inalterable way.
This technology underpins networks like Bitcoin, Ethereum and other cryptocurrencies, but virtually any type of asset can be tracked and traded using blockchain, from tangible assets (e.g., car titles and deeds) to intangible ones (e.g., patents and copyrights.)
Blockchain technology is often described as the backbone for a transaction layer for the entire internet, and governments, banks and other institutions are busily exploring new applications for it. These include privacy-safe sharing of patient data in medical settings, faster settlement times for financial transactions, anti-money laundering tracking systems, supply chain and logistics monitoring, and even voting.
Brent Perrault is an Engineering Manager at Paxos. Connect with him!