What Is Blockchain and How Does It Work
Blockchain is commonly defined as a decentralized, distributed, digital ledger. Think of it as a large Excel file that anyone can access, but nobody can edit.
In this file, there are multiple spreadsheets – each one linked to the previous one. Each spreadsheet stores all the information (e.g. asset/liability type, former owner etc.) of the prior spreadsheets, but with an extra bit of information.
This information can be a new transaction, and it can be inscribed in a new spreadsheet only if it is approved by everyone that has access to the whole Excel file.
In a nutshell, new bits of data must be validated by a pre-set of rules agreed upon by everyone that utilizes the Blockchain. This process repeats for every new entry. Using the Excel file as an example, the spreadsheets are what we call Blocks (blocks of information/data), and the overall Excel file is the Blockchain.
Benefits of Blockchain
With the potential to cut off intermediaries and middlemen, blockchain allows for faster transactions, interchanges, and the addition of (new) data at a considerably lower cost.
For example, transferring money from Bank A in Europe to Bank B in Asia could take approximately 3 to 5 business days with the current institutional infrastructure. Whereas in comparison, Blockchain allows this transaction to happen within less than a minute.
Additionally, Blockchain is more secure than our current system; as a hacker would need to breach the specific Block, together with all previous Blocks in all computers to temper with that one data.