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Definition: blockchain


For a comparison of the two largest blockchain networks, see Bitcoin vs. Ethereum. For other prominent blockchains, see major blockchains. The blockchain term was coined because a group of transactions is called a "block," and the blocks are linked together in a chainlike fashion (see illustration below).

A public blockchain, such as Bitcoin and Ethereum, is a decentralized ledger that is replicated and continuously validated for integrity by volunteers who dedicate at least one computer 24/7 to ensure that no previous transaction was altered. This guarantee of integrity is why blockchains are increasingly being touted to replace traditional information systems. In contrast, private blockchains are not run by anyone who volunteers, but they retain many of the attributes of the public chains (see private blockchain and consensus mechanism).

Why the Blockchain Architecture?
Because all data in a computer are nothing more than bits and bytes, they can be changed by anyone with access to the digital file. Even encrypted data can be altered if the encryption key that scrambled the data is exposed. However, because blockchain transactions are linked together, a change to any previous transaction breaks a link in the chain.

Ledger, Network and Database
Starting with Bitcoin, a blockchain is the latest and most unusual architecture to come down the pike. It is a ledger duplicated across a network and is known as a "peer-to-peer electronic cash system," "decentralized network," "distributed network," "distributed database," "distributed ledger" and "shared ledger." Tech guru David Pogue calls it a "tamperproof database."

Thousands of Copies
A blockchain is replicated on computers as few as a dozen to thousands depending on the network. For example, Bitcoin has thousands of nodes, and each node has either a copy of the entire blockchain or an abbreviated version for quicker verification. Although operating in computers around the world, a blockchain functions like a single computer with no downtime. See blockchain sharding.

Two Significant Advantages
A blockchain is the technology behind Bitcoin, Ethereum and other cryptocurrencies. However, because a blockchain provides a verifiable list of ownership, it is also used for recording contracts, titles and other legal documents. This irreversible guarantee of ownership is one of blockchain's major advantages.

A second and equally important feature is that blockchains eliminate the middleman such as a bank or other financial institution. As a result, the blockchain universe is known as "decentralized finance" (see DeFi).

Ethereum - General-Purpose Smart Contracts
Although Bitcoin is the most widely known, Ethereum is the second most popular blockchain. As a general-purpose platform, Ethereum's programmable "smart contracts" are much more versatile (see Ethereum, smart contract and NFT).

A Type of Distributed Ledger
A blockchain is continuously maintained by invested parties, which may perform only validation or be in the business of adding new transactions to obtain fees and newly generated coins (see crypto mining). See major blockchains, public key cryptography and crypto glossary.




The Internet Is the Data Transport
Every transmission between blockchains, exchanges and users' wallets is managed by the same TCP/IP protocol as every other activity on the Internet. Blockchain nodes are computers or specialized hardware, and they interact with each other via their own program interface (API). They also employ complex logic that seeks majority agreement (see consensus mechanism). See Internet protocol.






Popular Blockchains
Each circle above represents a blockchain network that contains from a dozen to thousands of nodes. There are many more blockchains than these examples, and new ones are coming online all the time. See Bitcoin vs. Ethereum, major blockchains, public blockchain, private blockchain and smart contract.








Hashing Maintains a Blockchain's Integrity
Blocks of transactions are "chained" together by creating a fingerprint of each block and storing it in the header of the next block. If a transaction were maliciously altered, validating nodes constantly recomputing this linkage would detect a break in the chain. See Merkle tree, mining node and crypto mining.






Fingerptings Are Created by Hashing
The fingerprints are created by passing the data through a hash algorithm, which creates a hash value of the same size no matter the size of the input. For example, SHA-256 always generates a 256-bit hash, and hashing is a one-way street. It is impossible to turn the hash back into the original data using traditional computers (see quantum secure). See Merkle tree and cryptographic hash function.