A blockchain is a public ledger of information collected through a network that sits on top of the internet. It is how this information is recorded that gives blockchain its groundbreaking potential.
Blockchain technology is not a company, nor is it an app, but rather an entirely new way of documenting data on the internet. The technology can be used to develop blockchain applications, such as social networks, messengers, games, exchanges, storage platforms, voting systems, prediction markets, online shops and much more. In this sense, it is similar to the internet, which is why some have dubbed it “The Internet 3.0”.
The information recorded on a blockchain can take on any form, whether it be denoting a transfer of money, ownership, a transaction, someone's identity, an agreement between two parties, or even how much electricity a lightbulb has used. However, to do so requires a confirmation from several of devices, such as computers, on the network. Once an agreement, otherwise known as a consensus, is reached between these devices to store something on a blockchain it is unquestionably there, it cannot be disputed, removed or altered, without the knowledge and permission of those who made that record, as well as the wider community.
As nothing that is recorded on a blockchain can be changed, it is important to be absolutely sure where you are sending money. On a blockchain, once a transaction is sent it is sealed and cannot be reversed.
Why is it Called “Blockchain”?
Blockchain owes its name to how it works and the manner in which it stores data, namely that the information is packaged into blocks, which link to form a chain with other blocks of similar information.
It is this act of linking blocks into a chain that makes the information stored on a blockchain so trustworthy. Once the data is recorded in a block it cannot be altered without having to change every block that came after it, making it impossible to do so without it being seen by the other participants on the network.
- Recorded: stored information is time-stamped.
- Transparent: anyone can see the ledger of transactions.
- Decentralized: the ledger exists on multiple computers, often referred to as nodes.
Normally, each block contains the data it is recording, for example a transaction like 1 Lisk token being sent from Alice to Bob, as well as timestamps of when that information was recorded. It will also include a digital signature linked to the account that made the recording and a unique identifying link, in the form of a hash (think of it as a digital fingerprint), to the previous block in the chain. It is this link that makes it impossible for any of the information to be altered or for a block to be inserted between two existing blocks. In order to do so all following blocks would need to be edited too. As a result, each block strengthens the previous block and the security of the entire blockchain because it means more blocks would need to be changed to tamper with any information.
When combined, all of these create an unquestionable storage of information, one that cannot be disputed or declared to be untrue.