A blockchain is a type of database. It differs from conventional databases by the way the data is stored.
Conventional databases store their information in table formats that can be accessed, filtered, and edited by any number of users simultaneously.
A blockchain collects information in blocks that have a limited storage capacity. Once the storage capacity of a block is reached, it is appended to the previous filled block.
Subsequent information is combined into a new block, which is then also appended to the previous block as soon as it is full, creating a chain of data known as a blockchain.
A decentralized blockchain system does not have any central authority or server. The myriad computers of a blockchain are based in different geographical locations and are managed by different people. These computers that make up the network are called nodes.
Each node possesses all the data that has been stored on the blockchain since its inception and is responsible for verifying and storing each newly generated record (block).
Bitcoin, Ethereum, and other cryptocurrencies are built on blockchain technology, with a blockchain allowing any number of records to be recorded immutably.
Among many other scenarios, a decentralized blockchain system can be used for:
- financial transactions
- smart contracts
- identity management
- certificate issuance.