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Blockchain technology, often referred to simply as ‘blockchain’, is transforming the way data is stored and secured. Originally developed as the basis for cryptocurrencies such as Bitcoin, it has quickly developed into a versatile technology that is used in numerous industries.
In this blog post, you can find out how it all works and what applications there are in general.
First Things First: What Is A Blockchain?
Blockchain is a decentralised and distributed database technology that consists of a chain of blocks.
The principle of blockchains is similar to account book technology, i.e. comparable to a cash book that cannot be interrupted or deleted.
Each block consists of:
- Information: Data stored in the block.
- Hash: A unique identification of the block, comparable to a fingerprint.
- Timestamp: Marks the time at which the block was created.
The special feature of a blockchain lies in its structure and mode of operation:
Linking the blocks
Each block contains the hash of the previous block, which creates a chronological and unchangeable chain of blocks. This link ensures that the sequence of blocks is clearly labelled.
Decentralisation
A blockchain is distributed on many computers (nodes) in the network and stored as a copy. When a new block is added, it must be accepted by all nodes in the network. This distribution makes it almost impossible to manipulate the blockchain, as all copies would have to be hacked and changed at the same time.
Transparency
All transactions are visible to everyone in the network, which creates trust and makes fraud more difficult.
Immutability
Once data has been entered into the blockchain, it cannot be subsequently changed or deleted. This ensures the integrity of the information. If someone tries to change data, the hash of the block changes and the change is rejected by the other nodes in the network.
Types and Use Cases of Blockchains
Not all blockchains are the same. There are different types and respective use cases.
Public blockchains are decentralised networks in which anyone can participate and view transactions. These blockchains offer a high level of transparency and security, as all data is publicly accessible and the network structure makes manipulation difficult. However, public blockchains can have slow transaction speeds and high energy consumption. Well-known examples are the cryptocurrencies Bitcoin and Ethereum.
Private blockchains are controlled by a specific organisation or group. These blockchains enable faster transactions and offer better data protection, as only authorised persons can gain access and carry out transactions. However, there is less decentralisation here and there must be trust in the central authority. Private blockchains are often used to optimise internal processes in companies. Well-known examples are Hyperledger Fabric and R3 Corda, which are often used in areas such as supply chain management and the financial sector.
Consortium blockchains are operated jointly by several organisations and are partly decentralised. The aim is to create a trustworthy environment for the exchange of information between members. One example is IBM Food Trust: a network of food companies that uses a shared blockchain to improve transparency and traceability in the food supply chain.
Hybrid blockchains combine features of public and private blockchains. They make it possible to make some data publicly accessible while others remain private. This offers a flexible solution for organisations that require both transparency and data protection. One example of a hybrid blockchain is Dragonchain. Originally developed by Disney, it provides a flexible and user-friendly environment for the development of applications and smart contracts.
An Outlook
We have learnt:
- Blockchain technology is often associated with cryptocurrencies such as Bitcoin. However, it is also used in many other areas.
- Blockchain has a lot of potential and could revolutionise many areas.
Let’s stay tuned to see what the future holds.
Responsible for the content of this article are Malak Mostafa and Linda Stroh.
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