MAINTAIN A PERMANENT AND TAMPER-PROOF RECORD OF TRANSACTIONAL DATA
Blockchain is the digital database containing information (such as records of financial transactions). Furthermore, this database can be simultaneously used and shared within a large decentralized, publicly accessible network. In other words blockchain is a distributed ledger for maintaining a permanent and tamper-proof record of transactional data. If you consider that a distributed ledger is a digital system for recording the transaction of assets (which are recorded in multiple places at the same time), blockchain makes sense.
Transactional data is the information recorded from transactions. A transaction is a sequence of information exchange and related work that is treated as a unit for the purposes of satisfying a request. Transactional data can be financial, logistical or work-related and can be anything such as a purchase order, the hours worked by employees or insurance costs and claims.
A blockchain functions as a decentralized database that is managed by computers belonging to a peer-to-peer (P2P) network. A database is a collection of information that is organized so that it can be easily accessed, managed and updated. In blockchain each of the computers in the distributed network maintains a copy of the ledger to prevent a single point of failure (SPOF) and all copies are updated and validated simultaneously.
When one thinks of blockchain one automatically thinks of digital currencies such as Bitcoin. Blockchain is however much more than this. In digital terms, blockchain is a secure and cost-effective way to create and manage a distributed database and maintain records for digital transactions of all types.
HOW IT WORKS
There are two types of records contained in a blockchain ledger and these are individual transactions and blocks. The first block consists of a header and data. This data refers to all the transactions that take place within a set period of time. The block’s timestamp is used to help create an alphanumeric string called a hash.
The process of creating a hash is repeated in subsequent blocks, but each subsequent block in the ledger uses the previous block’s hash to calculate its own hash. Before the new block can be added to the chain, its authenticity must be verified by a computational process called validation or consensus. Consensus ensures that all copies of the distributed ledger share the same state.
WHY IS BLOCKCHAIN SO AMAZING?
Once a block has been added, it can be referenced in subsequent blocks, but it cannot be changed. If someone tries to swap or change a block, the hashes for previous and subsequent blocks will also change and disrupt the ledger’s shared state. When consensus is no longer possible, other computers in the network are aware that there is a problem it won’t be possible to add any new blocks to the chain until the problem is resolved. The block causing the error will normally be discarded and the consensus process will be repeated.
Blockchain is not only used by cryptocurrencies such as Bitcoin, or by banks and financial institutions. It has been implemented with success in other industries such as healthcare, public services and technology precisely because organisations can use blockchain to enable the secure exchange of data. Security as you can see is a significant advantage of this technology. It is so secure because it is almost impossible to corrupt a blockchain because information is shared and continually reconciled by countless computers, and blockchain has no single point of failure. If one node goes down, it’s not a problem because all the other nodes have a copy of the ledger.
NBS Digital Technologies has the knowledge and the resources to implement blockchain in your organisation, enabling your business to take one secure step closer to the future.