Blockchain is a data structure that enables the creation of a digital ledger of transactions and share it within a distributed network of computers. It utilizes cryptography to enable each participant on the network to use the ledger in a secure way without a central authority.
Once a block of data is recorded and placed on the Blockchain ledger, it’s extremely hard to change or remove. Blockchain can be hacked in theory (it would take decades and a supercomputer), but in reality, it’s impossible. When a person wants to make a change to it, participants in the network — all of which have identical copies of the existing Blockchain — run algorithms to evaluate and verify the proposed transaction. If a majority of nodes approves the transaction — that is, confirms that the transaction is valid by identifying information that matches the Blockchain’s history — then the new transaction is approved, and a new block is added to the chain.
A Blockchain’s network can involve everyone with a computer. Each computer in a particular network is called a node. If everything is okay, each node should have a copy of the entire ledger, sort of a local database, and works with other nodes to keep the ledger’s consistency. This creates fault tolerance, so if one node disconnects or goes down, nothing is lost.
The consensus mechanism is a set of rules the network utilizes to verify each transaction and confirm on the current state of the Blockchain. For the Bitcoin Blockchain, the consensus mechanism is called proof of work, in which participants on the network run algorithms to confirm the digital signatures attached to blocks verify each transaction.
After a transaction is executed on a node, the result becomes a proposed modification of the Blockchain’s data. Before sending the answers to a node’s ledger, the answer is confirmed locally with other nodes in the network. Approved transactions are placed into a block and re-distributed to all the nodes in the network, which verify it again to ensure their records match. Typical transactions can be executed in milliseconds.
For additional info check this short video:
There’s also a great TEDTalks video where Don Tapscott explains the Blockchain technology and its potential in different industries and social groups. You can watch it here:
A tamper-proof data structure with superb security and decentralized network. The data is packed into blocks, which are stacked into Blockchain. It cannot be hacked. Strong encryption, multiple confirmations of each transaction and transparency are also there to enhance security.