Blockchain | B2B Finance Glossary
What is a Blockchain?
A blockchain is a distributed ledger created from growing lists of records called blocks. Every time a block is updated, the entire chain of blocks gets access to that information as soon as the update is made. Most blockchains are public, so people and institutions everywhere can see transaction records across the chain.
Blockchain technology is decentralized, which means it stores data across many different nodes (computers) that all make up a single network (as opposed to storing information in a single centralized location). Today, blockchains are known best for their use in cryptocurrency, such as Bitcoin and Ether, because they can maintain a decentralized and secure record of transactions.
However, blockchains can be used in many cases, especially those requiring secure data storage and record keeping.
How Does a Blockchain Work?
A blockchain consists of an ever-expanding series of records called blocks. These blocks are securely linked together through cryptography – creating private and safe communications that can only be exchanged between the sender and receiver of that information (especially in the face of adversarial behavior).
Each block on a blockchain contains a cryptographic hash of the previous block, a timestamp that shows proof that the transaction data existed when the block was initially formed, and the transaction data itself. The block chain is created because every block carries information about the previous block and links to the block that comes directly before it.
This is why blockchain transactions are not reversible: once they are recorded, the data in a single block cannot be changed without altering the other blocks, and this can only occur if the entire network reaches a consensus to do so.
Is Blockchain Technology Secure?
2022 saw the unraveling of the crypto industry, but even amidst the widespread fraud and deception across the industry, the underlying blockchain technology remains extremely innovative and secure. That’s because new blocks are stored linearly and chronologically; in other words, after a new block is created, it is always added to the end of the chain.
After a new block is added, it’s impossible to go back and alter the contents of the block unless the majority of the network reaches a consensus and agrees to make the alteration. So, if a hacker attempted to run a node on a particular blockchain network and tried to alter the chain to steal digital assets, the hacker would only be able to alter their copy, which would no longer align with everyone else’s copy. As a result, the hacker’s version of the chain would be seen as fraudulent and discarded.
Because of this, blockchain technology is still ideal for securely storing information, especially for enterprise technology, app building, asset transactions, medical records, and so much more.
What is the Difference Between Blockchain and Cryptocurrency?
Blockchain technology is the underlying foundation on which cryptocurrencies are built, but, at the end of the day, blockchain is very distinct from cryptocurrencies themselves. In other words, blockchains can function without cryptocurrency, but cryptocurrencies cannot function without blockchain technology.
Cryptocurrency is an entirely digital currency that operates on a decentralized network and does not require a third party – such as a government or bank – to operate. It’s a new form of money built using blockchain and cryptography and can be used to send digital assets to anyone at any time.
Blockchains, on the other hand, can be used for various projects unrelated to cryptocurrency. These include enhancing security and privacy when it comes to voting for government officials, supply chain management, enterprise record-keeping, lending protocols, insurance, property ownership, real estate, the authentication of luxury goods, and more.
Why is Blockchain Technology Important for the Enterprise?
For a business to be successful, it has to utilize data. The more quickly and accurately data can be received, the more successful a business will be. Blockchains can be used as an immutable ledger that tracks orders, payments, production processes, supply chain, accounting, and more, which means that this technology is ideal for storing and transmitting information because it offers immediate, shared, and transparent access to data that can be accessed across a distributed network.
The difference between a blockchain and other types of databases is the way in which a blockchain stores information. Blockchains are decentralized and more censorship resistant than centralized databases because no single authority is in charge of the system. They store information in blocks that are all simultaneously updated every time information is added to one block on the chain, and anyone can access and add to this list of information at any time. On the other hand, centralized databases are not public, which means that only known parties can transact through them. Additionally, centralized ledgers and databases are run by a ruling party, which means they are not as resistant to censorship as blockchains.