Understanding Blockchains

A blockchain is a distributed ledger, a time-stamped data structure that contains an entire history of transactions for a system and cannot be altered by any one party in the blockchain system. Blockchains are based on cryptographic tokens and algorithms and a peer-to-peer network that verifies transaction history, so transactions can be trusted without requiring the use of a centralized authority or clearinghouse approving or vouching for the transactions. In a blockchain deployment, copies of the blockchain are replicated across nodes and are assured to be consistent through a set of consensus algorithms.

The Bitcoin cryptocurrency was the first major decentralized application (frequently called a “dapp”) based on blockchains. Blockchains are now being extended to support applications based on smart contracts, which automatically carry out transactions between blockchain participants when pre-agreed conditions are met. Smart contracts are increasingly used in financial and supply chain systems and are based on protocols provided by third parties such as Ethereum, Corda, and Quorom.