A blockchain, as its name suggests, is a virtual chain made of blocks, where each block contains information.

Alternatively, it can be described as a digital ledger, where each block of data represents a distinct transaction on the ledger, with the transactions occurring across a decentralized peer-to-peer network. This peer-to-peer network consists of a network of computers (each called a “node”) connected together, which allows the participants in the blockchain to transfer information across the internet without the need to involve any centralised third party. Each block in a blockchain comprises of (i) the transaction data (ii) a timestamp recording the creation of the block and (iii) a cryptographic hash which is unique to each block, akin to a “fingerprint”. When a node initiates a transaction, it sends across a message to the other nodes in the network. Each transaction is verified by the nodes, without relying on any external party for authentication, before it is added to the blockchain. This verification process is as follows. Each node in the network has its own set of public and private cryptographic keys. Whenever a transaction is initiated by a node, it generates a digital signature with its private key. The digital signature is proof of the authenticity of the data present in the block. Once the transaction has been examined by every node, there is an electronic vote amongst them to decide the validity of the transaction. If a majority of the nodes hold the transaction to be valid then it is written into a block and the newly created block forms a part of the chain.

Blockchain Technology – A Review [Download pdf]