Blockchain is a type of ledger technology that stores and records data.

Blockchain is the buzzword that seems to dominate any conversation about the future of technology, from the power of cryptocurrencies to new forms of cybersecurity. While the applications for the technology seem endless, not many people are entirely sure what the blockchain is.

In the old days, transactions were tracked in written ledgers and stored in financial institutions. Traditional ledgers could be audited, but only by those with privileged access. Blockchain took these concepts and democratized them by removing the secrecy around how information – namely transaction data – was handled.

In its simplest form, a blockchain is a distributed list of transactions that is constantly updated and reviewed. Also known as distributed ledger technology (DLT), it can be programmed to record and track anything of value across a network spread around multiple locations and entities. This creates a sort of worldwide spider web of connected computers.

While often associated with cryptocurrencies, blockchain technology is not exclusive to the digital asset market. Thanks to its unique ability to add and store data, it can serve many other functions across a range of industries.

What does a blockchain look like?

Blockchain technology can be broken down into two components: the block and the chain.

A block is a collection of data that is linked to other blocks chronologically in a virtual chain. You can think of a blockchain as a train consisting of multiple carriages connected in a line, where each carriage contains an amount of data. Just like with passengers in a real-life train carriage, blocks can fit only a certain amount of data before they’re full.

Each block also contains a timestamp, and so it’s clear when the data was recorded and stored – something that’s vital for things like transaction or supply chain data where knowing exactly when a payment or package was processed is important.

How many copies are there?

There is not a single master copy of a blockchain. Instead, every person who runs a computer that contributes to the network – also known as a “node” – maintains their own copy of the blockchain, and constantly checks with other nodes to make sure everyone has the same record of data. By having each individual contributor store their own copy, it means there is no single point of failure. This impressive layer of security also means it’s virtually impossible for malicious agents to tamper with the data stored on blockchains.

Unlike a database of financial records stored by traditional institutions, the blockchain is completely transparent and aims to be distributed, shared across networks, and in many cases, fully public. By prioritizing transparency around transactions and how the information is stored, the blockchain can act as a single source of truth.

How is data added to a blockchain?

Beyond being transparent with data, the blockchain is also a secure way to store it. Using Bitcoin as an example, here’s how a transaction is added to a new block:

When a bitcoin user sends a transaction, a message is created with both the sender’s and the receiver’s public addresses and the amount being transacted. The sender takes this data, adds their private key to the mix, and then creates a hash of it (turns it into a fixed-length code.) This creates a digital signature to confirm the person who owns the amount of bitcoin intends to send it to the receiver.

The sender then packages this digital signature with the message and their own public key and broadcasts it to the network. Above all, there exist various types of blockchain- public, private, hybrid, and sidechain.