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A blockchain is a distributed database or ledger that is shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format. Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin, in maintaining a secure and decentralized record of transactions. The innovation with a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.
One key difference between a typical database and a blockchain is how the data is structured. A blockchain collects information together in groups, known as blocks that hold sets of information. Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block, forming a chain of data known as the blockchain. All the information that follows that newly added block is compiled into a newly formed block that will then also be added to the chain once completed.
A database usually structures its data into tables, whereas a blockchain, as its name implies, structures its data into chunks (blocks) that are strung together. This data structure inherently creates an irreversible timeline of data when implemented in a decentralized environment. When a block is filled, it is set in stone and becomes part of this timeline. Each block in the chain is given an exact timestamp when it is added to the chain.
Blockchain is a type of shared database that differs from a typical database in the way that it stores information. Blockchains store data in blocks that are then linked together via cryptography.
As the data comes in, it is entered into a fresh block. Once the block is filled with data, it is chained onto the previous block, which makes the data chained together in chronological order.
Different types of information can be stored on a blockchain, but the most common use so far has been as a ledger for transactions.
In Bitcoin’s case, the blockchain is used in a decentralized way so that no single person or group has control—rather, all users collectively retain control
The data entered by a decentralized blockchain is irreversible because it is immutable. For Bitcoin, this means that transactions are permanently recorded and viewable to anyone.
How Does a Blockchain Work?
The goal of blockchains is to allow digital information to be recorded and distributed, but not edited. In this way, a blockchain is the foundation for immutable ledgers, or records of transactions that cannot be altered, deleted, or destroyed. This is why blockchains are also known as distributed ledger technology (DLT)..
First proposed as a research project in 1991, the blockchain concept predated its first widespread application in use: Bitcoin, in 2009. In the years since, the use of blockchains has exploded via the creation of various cryptocurrencies, decentralized finance (DeFi) applications, non-fungible tokens (NFTs), and smart contracts.