A blockchain is a public ledger using the underlying infrastructure of the Internet that chronologically records and stores the history of every action ever recorded on a specific network. Information and transactions are bundled into blocks and posted to the chain as they are generated. The blockchain is maintained by nodes, or interconnected computers on the network. These nodes and interconnected computers execute algorithms to form a block. Once a block is formed and validated by the nodes and computers, it is posted on the blockchain. The stored data is encrypted.
When individuals transact business over the internet using a blockchain, they need a private key and a public key. The public key is used to send and receive payments. The private key secures the payment. When both are present, proof of ownership and digital identity is established.
A blockchain uses the entire network to ensure the validity of a single block. Instead of a central authority, the blockchain requires a majority of the nodes to reach a consensus and validate through math that something has occurred. Different consensus mechanisms exist, but the most common one is called proof-of-work. Once a block has been added to the blockchain, it becomes an immutable record.
Blockchain has been called the ‘next Internet’, or the Internet of Value. There are many different blockchains including public, private, and consortium blockchains.
A public blockchain allows anyone to join and become a node. All transactions are publicly available and the value of the transaction is public. On a public block, the wallet ID is visible as opposed to the name or ID of the person or entity that controls the wallet.
A private blockchain has identified participants. It is different from a public blockchain as it controls who is allowed to participate in the network, execute the consensus protocol, and maintain the ledger.
A consortium blockchain has predefined rules, roles, and consensus mechanisms. In a consortium blockchain, a few selected nodes are predetermined. In contrast to a public blockchain, it does not enable everyone connected to the internet to participate in the verification of the transaction. In contrast to a private blockchain, it does not enable a single company to have full control.