In short, the blockchain is a digital, ever-growing list of data. It consists of many blocks arranged in chronological order, interconnected and protected by cryptographic methods.
The first blockchain prototype appeared in the early nineties, when computer scientist Stuart Haber and physicist W. Scott Stornetta first used cryptographic methods in a chain of blocks to protect digital documents from data forgery. This work inspired many: Dave Bayer, Hal Finney and other computer specialists and cryptography enthusiasts, which led to the creation of Bitcoin — the first decentralised system of electronic money (or, simply, the first cryptocurrency). This was first officially announced in 2008 under the pseudonym Satoshi Nakamoto.
Although the blockchain itself is older than Bitcoin, it is precisely the technology that still lies at the heart of most cryptocurrency networks, guaranteeing decentralisation, wide distribution, and general availability. Block chains are constantly growing, but they still store data about all previously confirmed transactions.
Blockchain transactions are carried out as part of a peer-to-peer network of globally distributed computers (nodes). Each node maintains a full copy of the chain, which contributes to the functioning and security of the entire system. This is what makes Bitcoin a decentralised digital currency that denies boundaries, censorship, regulation, or any third-party mediation.
The blockchain was specifically designed as a distributed ledger technology (DLT) to ensure high stability of the entire system to changes and fraud (such as double costs). This is due to the fact that the chain of bitcoins, as a whole database, cannot be changed or remade without using an impractical amount of electricity and computing power. It allows you to create “original” digital documents resistant to forgery and copying.
The consensus algorithm “Proof of Work” allows the Bitcoin blockchain to use the so-called Byzantine fault tolerance (BFT) as a fault tolerance system. The whole system can work continuously even if individual participants (nodes) provide low-quality information or inefficient functionality. This algorithm is an extremely important element of the Bitcoin mining process.
The blockchain technology can be adapted and implemented in other activities, such as healthcare, public administration, supply chains, etc. Moreover, despite the fact that this method was developed for decentralised systems, it can also be adapted for centralised ones to provide greater reliability of data storage and reduce operating costs.