What Exactly Is Blockchain?
Cryptocurrency and blockchain have taken the world by storm, with people making and losing fortunes according to the value of Bitcoin, Ethereum, Dogecoin, Shiba Inu, and countless others, as outlined by Fortune. While cryptocurrency (and NFT projects) may get the lion's share of media coverage, closely associated is blockchain technology. The two go hand-in-hand, but blockchain has far wider applications and uses for all types of businesses (via Investopedia). In fact, according to Blockdata, 81 of the top 100 companies globally are already using blockchain technology.
What's more, Research and Markets predicts the blockchain market will grow at a compound annual growth rate (CAGR) of 68.4%, reaching some $67.4 billion by 2026.
Despite the growing importance of blockchain technology, many still don't understand exactly what it is, or why so many companies are investing in it. Even those who may know a little about it may still not understand how its application extends far beyond cryptocurrency.
Understanding blockchain
At its most basic level, blockchain is another way of storing data, much like a traditional database (via Investopedia). Unlike a traditional database where data is stored in tables and fields, blockchain data is stored in "blocks." A key element of a blockchain is immutable data. Each block can hold a specified amount of data, and once that block is filled, its data cannot be changed — even if the data contains an error. Instead, a new block containing a corrected version of the data is created, with both blocks available for viewing or inspection. Each of these blocks of data is joined in a chain of blocks.
One of the biggest advantages of a blockchain, versus traditional databases, is its distributed nature, as Investopedia outlined. While a traditional database is housed on a single server or group of servers, a distributed ledger resides on many different computers, with each one containing a complete copy of the ledger. Distributed blockchains are almost impossible to compromise since a copy of the ledger is distributed. If someone changed their copy of the ledger, it would be apparent which one was altered or corrupted.
This distributed nature is one of the reasons blockchains are becoming so popular with businesses (via Harvard Business Review). Financial institutions, for example, are increasingly using blockchains to store, verify, and secure financial records. The immutable quality of the data, combined with its distributed nature, ensures its integrity and protects it from loss, manipulation, or hacking.