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What is Blockchain in simple terms?

Technology

What is Blockchain in simple terms?

by | Technology

Ben Constanty

CEO, Smartlink

Disrupting online payments with smart contracts.

The term “Blockchain” has become quite ubiquitous in tech circles over the past couple of years.

Blockchain technology has been around for over a decade, but the world witnessed its true potential only after the sudden rise of ICOs (Initial Coin Offers), IEOs (Initial Exchange Offerings) in 2016 and 2017.

Research predicts that the size of the blockchain technology industry is likely to grow from $3.0 billion in 2020 to over $39.7 billion in 2025.

Despite its profound growth, very few can explain blockchain in simple terms.

This post aims at giving a simple explanation of blockchain technology to our readers.

🔎 Key takeaways

  • Blockchains are publicly distributed with no central authority.
  • All the data registered on the blockchain will remain on the network forever and is immutable
  • Every aspect of a transaction is visible to the entire network

A simple definition of Blockchain

What is blockchain?

A blockchain is a sequential record of data with each unit of a blockchain (block) linked to its previous and next block through cryptographic functions.

Blockchains are publicly distributed with no central authority.

The public nature of blockchain allows anyone and everyone to monitor ongoing transactions.

The only way new data can be added to a blockchain is through a consensus algorithm, which means that all the members of the blockchain must accept the validity of a transaction (based on a set of rules) before it can become a part of the network.

In addition to its public, distributed nature, blockchains are immutable records of data.

Any data registered on the blockchain will remain on the network forever.

Blockchains democratize the storage and control of data, making it immune to manipulation by large enterprises.

What are the core components of a Blockchain?

The core components of blockchain

Now that you understand what is blockchain in simple terms let’s have a look at the core components of a blockchain.

  • Blocks: A block is a building component of a blockchain with the primary purpose of holding transactions.
  • Transactions: A transaction is the smallest unit of a blockchain. It can contain records, information, or other complicated tasks.
  • Nodes: Any user or device which is a part of a blockchain network is called a node. It can be a smartphone or computer.
  • Miners: Miners are special nodes within a blockchain network that are responsible for validating blocks and adding them to the blockchain.
  • Consensus algorithm: A consensus algorithm or protocol represents a set of rules that every node must abide by to perform transactions over the blockchain network.

3 Reasons why blockchain technology is popular

Why blockchain is so popular

We have already covered what is blockchain in simple terms, so it’s time to understand why blockchain technology is so popular.

  • Transparency: Blockchains are distributed digital ledgers in the public domain, which means there are no chances of manipulation. Every aspect of a transaction is visible to the entire network. Not only does it improve transparency, but boosts the confidence of platform users.
  • Immutability: Blockchains are immutable, which means any record that once entered the blockchain will always stay on it. It is a permanent, immutable record of data with several applications across different industries.
  • No central authority: Blockchains are networks of nodes with no central authority. It is the purest form of democratic governance that we have seen in the business domain.

Bottom line

Blockchain technology is a disruptive technology which is already revolutionizing multiple industries.

As more governments and conventional establishments come onboard, we’re likely to witness a surge in the use cases of blockchain technology.

We hope that you can explain blockchain in simple terms after reading this post. If you have any questions, kindly share them with us.

Ben Constanty

CEO, Smartlink

Disrupting online
payments with smart contracts.

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