Despite its complexity, the term “blockchain” can be broken down into simpler components. At its core, blockchain is essentially a chain of blocks, although not in the conventional sense of these words. In the context of blockchain, “block” and “chain” refer to digital information (the “block”) stored in a public database (the “chain”).

Here’s a breakdown of what constitutes a “block” in blockchain:

1. Transaction Information: Blocks store details about transactions, such as the date, time, and monetary value of a purchase. (Note: The example of Amazon transactions is for illustrative purposes; Amazon retail does not operate on blockchain principles.)

2. Participant Information: Blocks record information about the parties involved in transactions. For instance, a block for a purchase on Amazon would include your name and Amazon.com, Inc. However, rather than using actual names, transactions are recorded with unique “digital signatures,” akin to usernames.

3. Unique Identification: Each block contains a distinctive code known as a “hash,” which distinguishes it from other blocks. Just as individuals have names to set them apart, blocks have hashes to ensure their uniqueness. Even if you were to make a second purchase on Amazon with similar details, the blocks would still be discernible due to their unique codes.

How Does Blockchain Work?

Now, let’s delve into how blockchain functions, with a few key concepts in mind:

A blockchain ledger comprises two types of records: individual transactions and blocks. The initial block contains a header and data relating to transactions that occurred within a specific timeframe. The block’s timestamp is utilized to generate an alphanumeric string referred to as a hash.

Subsequent blocks in the ledger utilize the previous block’s hash to calculate their own hash. Before a new block can be added to the chain, its authenticity undergoes verification through a computational process known as validation or consensus. At this stage of the blockchain process, a majority of nodes (participants) in the network must agree that the new block’s hash has been accurately calculated. This consensus ensures that all copies of the distributed ledger maintain the same state.

Once a block is added, it becomes a reference point for subsequent blocks, and its content cannot be altered. If an attempt is made to replace a block, the hashes of both preceding and succeeding blocks would change, disrupting the shared state of the ledger. When consensus cannot be reached due to such an alteration, other computers in the network become aware of the issue, and no new blocks are added until a solution is found. Typically, the problematic block is discarded, and the consensus process is repeated.

Who Uses Blockchain?

Blockchain technology finds application in numerous industries, including Financial Services, Healthcare, Government, Travel and Hospitality, Retail, and CPG (Consumer Packaged Goods). Here’s a brief overview of how blockchain is utilized in various sectors:

Financial Services: Blockchain streamlines asset management and payments, eliminating the need for intermediaries and ensuring transparency in transactions.

Healthcare: It enhances privacy, security, and interoperability of healthcare data, facilitating secure data sharing among stakeholders while reducing costs.

Government: Blockchain improves data transactional processes across government departments, enhancing transparency and monitoring capabilities.

CPG and Retail: Blockchain can authenticate high-value goods, prevent fraud, track stolen items, manage loyalty points, and optimize supply chain operations.

Travel and Hospitality: Blockchain can revolutionize various aspects of travel, including money transactions, document storage, reservations, and loyalty programs.

Recent Blockchain Applications:

Numerous organizations and financial institutions have adopted blockchain technology for various purposes:

1. Deutsche Bank: Explores blockchain for payments, asset registries, and more.

2. NASDAQ: Implements blockchain to enhance its Private Market Platform and partners with Chain for blockchain infrastructure.

3. DBS Bank: Organizes a blockchain hackathon in collaboration with Coin Republic and Startupbootcamp FinTech.

4. EBA (Euro Banking Association): Releases a report discussing the impact of crypto-technologies on transaction banking and payments.

5. US Federal Reserve: Collaborates with IBM on a digital payment system tied to blockchain.

6. SCB (Standard Chartered Bank): Acknowledges the cost-cutting and transparency potential of blockchain in financial transactions.

7. Various Banks: Explore blockchain for numerous banking services, such as payments, trading, and settlement.

These examples highlight the widespread adoption and experimentation with blockchain technology across various sectors.