What is Blockchain

Blockchain technology is similar to a shared database, it’s really just a sophisticated ledger system. Ledgers have been used since ancient times, long before computerization, where different mechanisms were used to record different transactions involving trade, property or other assets. While the concept of a ledger remained the same, the records have transitioned from papyrus to electronic records in a digital ledger.

The simplest example is carbon paper: this paper allows you to make copies of the same document or information instantly, ensuring that, for example, everyone involved has the same copy of a contract. Carbon paper has been an invention that gave confidence to the parties involved, since it is not the same to have the same copy instantly, at the time of writing, than to copy the same document twice by hand. Those involved are certain that the information contained in that record (ledger) is exactly the same, giving integrity to the data and trust to the parties. The Blockchain is like carbon paper, a trusted technology. It is basically a distributed database where a record of each transaction or exchange ever made, is kept.

A key component of Blockchain is its P2P or distributed network arrangement, which eliminates the need for a trusted third party or intermediary service to perform certain functions.

The innovative thing about blockchain is that the registry is distributed in each of the members that are part of the process and because it is not a centralized base, it is impossible to modify it since once a data has been recorded and linked to a previous block, the block is validated by the entire network in real time, giving confidence and certainty to all the nodes that make up the network (a key function of this technology). It is also thanks to this chain that events can be ordered in time, in order to provide traceability and transparency to any type of process.

Centralized networks depend on a single controlling authority responsible for all operations on the system. A distributed database allows for all participants of the network to have a synchronized identical copy of the ledger; thus, when a change is made to the ledger, it is propagated and reflected in all copies held by the network participants, creating an immutable record of transactions. This makes unauthorized alterations significantly more difficult than they may be with traditional ledgers, which can be modified by a single trusted authority.

Each transaction, which can be any form of value, like money, documents or certificates, is added to a new block which is time-stamped and cryptographically ‘chained’ to the previous block that was added to the blockchain, which was chained to the block before it, and so on, all the way to the first block. Hence the name ‘Blockchain’.

For a transaction to be added to the ledger it has to have the consensus of an entire network, which consists of a chain of computers connected, thereby creating a continuous mechanism of control regarding manipulation, errors, and data quality. Once new data is entered it can never be erased. As blocks are only added to the blockchain with the consensus of independent nodes, there is no single point of failure through which the Blockchain’s data can be corrupted.