What is blockchain?

Blockchain is the original technology that was used to manage Bitcoin, the first cryptocurrency. Since blockchain came on the scene, it's been adopted by other crypto and virtual currencies and adapted for their own use, but the basic technology remains the same.

What does blockchain do? And what makes it different?

Blockchain is a technology that can be used to safely record anything of value. At this point in time, it's being used predominantly as a new type of secure payment system.

Traditionally, if you want to make a payment to another account, you use a bank or a foreign exchange service. You'll pay a fee to your bank in the form of charges or exchange rates for conducting the transaction. And it'll probably take a couple of days for your payment to reach the receiving bank account.

Blockchain technology disrupts this process. It removes the need for the involvement of a third-party financial institution making payments faster, cheaper, and more secure than ever before.

Who can use blockchain?

Blockchain is a system that uses open-source technology. This means it's available to anyone who understands code. Programmers can copy, change, and redistribute the coding without paying royalties. So, it's a technology that can evolve as programmers adjust the code to suit their purpose.

How does it work?

To understand a little more about how blockchain works, think of it as a new type of database that holds an immense volume of data stored in a new way - a block.

When you (also described as a "user" or "node") make a payment using blockchain technology, the transaction is entered into the system and transmitted to a network of computers located worldwide.

This network of computers has a community of users or "miners" that use exceptional computing power to solve the mathematical equation of the block, confirming its validity. The first "miners" to solve the block validate the transaction and get paid for their efforts.

This method of verification provides exceptional levels of traceability, security, and speed. Massive servers allow users from all around the work to filter and pull information from the database quickly and easily. And if one block in the chain was tampered with, it would be apparent to every user in the system.

What makes blockchain so secure?

When the transaction has been identified as valid, the transaction information is stored in a block with other transaction details placed at a similar time. Once this block is full of data, it attaches to the previous block, creating a long chain of transactions. The transaction can never be changed. You can't get it back, nor can you cancel it.

With this technology, it's verging on impossible to change, hack or cheat the system because of the way the information is recorded.

What's the future of blockchain?

Blockchain isn't just being used in the public domain. Private companies are using it too – in particular, financial institutions. Moreover, with demands for compliance continuing to increase, secure payment solutions using blockchain technology are beginning to play a crucial part in helping to reduce compliance costs.

However, because blockchain is self-regulating and has no government oversight, it’s crucial that as the technology evolves the blocks remain secure, so it can continue to provide a high level of confidence to its users.

We’re already starting to see blockchain technology used in industries where accurate supply chains are crucial to their service, such as the organic food industry. Perhaps in the not-so-distant future, we'll also see it used in secure voting platforms so that scenes such as those we saw at last year's US election won't happen again.

One thing's for sure - the use of blockchain technology is only going to grow as more and more people come to understand how its secure and auditable nature will only stand to benefit their business.