What is Blockchain? The Essentials

Blockchain is a technology that is spreading across all areas of both the public and private sector. It is a system that is most famously known for facilitating the use cryptocurrencies but can be applied in many other areas. The most popular of these cryptocurrencies is bitcoin, currently valued at around 2,500USD per bitcoin – gaining fivefold in value over the past year.

1.What is a Blockchain?

A blockchain is a distributed database that acts as a continuously growing list of records, each of which is called a block. A blockchain in Bitcoin use is a public ledger of all Bitcoin transactions – this includes every single transaction that has ever taken place and is constantly growing as ‘completed’ blocks are added to the ledger. Each block adds to a chain of transactions and is appended to the blockchain in chronological order.

The system of the cryptocurrency works across a network of computers connected through the internet (a peer to peer network) – each computer connected to this network is referred to as a node. These computers are used as part of the system to process transactions and each node holds a copy of the blockchain that is used to validate transactions as they occur.

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2.Blocks explained

In the case of Bitcoin, a block is a file where data about the Bitcoin transactions and network is permanently recorded. All Bitcoin transactions are added continuously to blocks as they occur in time order and these files added together make up the blockchain ledger system.

Crucially, each time a block is ‘completed’, the next block is created and added to the blockchain and each block contains a timestamp and a link to a previous block – maintaining the consistency and permanency of the chain. Previous blocks act as permanent records which can never be altered or deleted.

3.Bitcoin

The first blockchain was conceptualised by Satoshi Nakamoto in 2008 and implemented in 2009 as an essential component of the open source cryptocurrency bitcoin. The bitcoin design has been an inspiration for other innovative currencies and applications over the past 8 years and this continues to gather pace.

Albeit somewhat volatile, the growth in Bitcoin adoption has led to growth in Blockchain technology hand in hand. The blockchain system ensures the currency operates without a central repository or single administrator to control or manipulate the money supply.

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4.Encryption

Encryption within the blockchain system prevents fraud and leads to increased security for Bitcoin users. Blockchain technology can in fact be applied to many other areas outside of currency use – processing encrypted data on any subject. One particularly growing example is with medical records. This allows data to be securely shared between various parties whilst protecting the data from fraud. It also facilitates accurate data sharing that can be updated almost instantaneously.

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5.What’s next?

The adoption of Blockchain technology is growing at an accelerating pace. Most recently, on July 10th 2017, Virgin Group founder Sir Richard Branson announced a commitment to make a Series B investment in the company Blockchain (Blockchain.info) – a software company that acts as a bitcoin wallet and block explorer service. Blockchain (Blockchain.info) is the most popular bitcoin wallet globally. To date, Blockchain has raised 70USD million from international investors. This activity is a significant indicator of future growth of this technology.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.