Definition:
Blockchain is a type of distributed ledger technology that securely records transactions across a network of computers, known as nodes. Each transaction is grouped into a block, and these blocks are linked together chronologically to form a chain—hence the name “blockchain.” The key feature of blockchain technology is its decentralization, meaning no single entity controls the entire network.
Additional Context:
Blockchain technology was first introduced as the underlying infrastructure for Bitcoin, the first cryptocurrency. However, its applications have since expanded far beyond digital currencies. In a blockchain, once a transaction is recorded and verified by the network, it becomes nearly impossible to alter, ensuring data integrity and transparency.
In the context of crypto exchanges, blockchain technology is vital for ensuring the security and transparency of transactions. Many cryptocurrencies are built on their own blockchains, like Ethereum, which also supports decentralized applications (dApps) and smart contracts. These smart contracts are self-executing contracts where the terms of the agreement are directly written into code.
Blockchains can be public, private, or consortium-based. Public blockchains, like Bitcoin and Ethereum, are open to anyone who wishes to participate, while private blockchains are restricted to certain users. Consortium blockchains are partially decentralized, with control spread across a group of organizations rather than a single entity.
Blockchain’s potential uses extend beyond cryptocurrency. It is being explored for applications in supply chain management, healthcare, voting systems, and more, thanks to its ability to provide a transparent and tamper-proof record of data.
Related Terms:
- Smart Contracts: Self-executing contracts with the terms directly written into code on a blockchain.
- Consensus Mechanism: The process by which a blockchain network agrees on the validity of transactions.
- Mining: The process of validating and adding transactions to a blockchain.
