A blockchain is a tamper-proof “cash book” organized in a series of linked “blocks” of data. These blocks are added according to a set of special rules (known as Consensus Algorithm). This allows networks of remote physical computers working together to form a single virtual computer.
The blockchain is different from other computer networks in that it is permissionless. Any computer, can become part of this larger virtual computer as long as it follows the Consensus Algorithm. In a blockchain, the blocks themselves can be regarded as the computer hard disk. A block is a record of a new transaction. When a block is complete, it is added to the chain. The Consensus Algorithm is like the operating system (like a Windows or MacOS). And the peer-to-peer network is like the silicon semiconductor circuits that transfer data between different parts of a computer.
The information is constantly synchronized with the database, which is stored in multiple locations and updated instantly. This means that the records are public and verifiable. Since there is no central location, the system is more difficult to hack, as the information exists simultaneously in millions of locations.
“Imagine a spreadsheet duplicated thousands of times over a network of computers. Then imagine that this network is designed to update that table regularly and you have a basic understanding of the block chain.”
Unlike a conventional computer, a blockchain computer can offer very strong trust guarantees based on the cryptographic and game theory properties of the system. For example, a user or developer can trust that code running on a blockchain computer will continue to behave as intended even if individual computers on the network attempt to undermine the system. For example, a blockchain computer enables disintermediated, peer-to-peer interactions and digital services owned by communities rather than companies.
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