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A new technology is redefining the way we transact. If that sounds incredibly far-reaching, that's because it is.
Blockchain has the potential to change the way we buy and sell, interact with government and verify the authenticity of everything from property titles to organic vegetables.
It combines the openness of the internet with the security of cryptography to give everyone a faster, safer way to verify key information and establish trust.
What is Blockchain?
Blockchain technology was originally developed as part of the digital currency Bitcoin. But the two are not the same. Blockchain can support a wide range of applications, and it's already being used for peer-to-peer payment services, supply chain tracking and more.
A Digital Record
At its heart, a blockchain is a record of transactions, like a traditional ledger. These transactions can be any movement of money, goods or secure data—a purchase at a supermarket, for example, or the assignment of a government ID number.
Blockchain is designed to store information in a way that makes it virtually impossible to add, remove or change data without being detected by other users.
Today, transactions are verified by a central authority—like a government or a credit card clearinghouse. Blockchain applications could replace these centralized systems with decentralized ones, where verification comes from the consensus of multiple users.
How Does it Work?
A blockchain needs to do two things: gather and order data into blocks, and then chain them together securely using cryptography.
Recording a Transaction
Let's start with a simple transaction: Alice sells her car to Bill.
The transaction information is recorded and shared with the other computers in the blockchain network.
Building Transactions into Blocks
On the network, the record is combined with other transactions into a block—like a traditional computer database. Each transaction is time-stamped.
When a block is complete, it also gets its own time stamp. So all information is sequential, which helps avoid duplicate entries.
Connecting Blocks into a Chain
Into the Network
The completed block is sent out across the network, where it's appended to the chain.
Forming a Line
Other participants on the network may be sending out their own blocks at the same time.
But the time stamps ensure that data is added in the right order, and all participants have the latest version.
Securing the Chain
The key to a blockchain's security is something called a hash. It's a bit of cryptographic math that makes the links between blocks virtually unbreakable.
A hash function takes the information in each block and uses it to create the hash—a unique string of characters.