Blockchain

According to Wikipedia, a block chain or blockchain is a distributed database that maintains a

continuously growing list of data records hardened against tempering and revision. It consists of data
structure blocks which holds specific information about a transaction. Each block contains a timestamp
and information linking it to the previous block.

While this is a technical definition of the powerful blockchain technology, it can simply be defined as a
trusted financial ledger. The basic function of blockchain technology and the feature that makes it so
powerful is the trust factor that is ingrained in it. There are many ways to explain the basic of blockchain
technology. If you are familiar with TCP/IP protocols which enabled delivery of data packets among
different machines and the more familiar HTTP interface which lets individual systems communicate
with the web servers. Blockchain is a similar technology.

The other comparison is with the peer to peer sharing site which started with Napster. But after
Napsters demise, it was taken up by multiple legal and illegal business. In recent years, it is being used
by Skype and Spotify and further by Bitcoin.

Now moving on to the trust factor. The trust factor comes from the fact that no single user controls the
blocks and there is no central authority for validating the transactions. The transactions are verified or
validated by group of users known as miners. The miners use their computational power to verify the
transactions. The miners are compensated as they are using their bandwidth and electric power to do
the verification process.

Apart from using blockchain as base for Bitcoins, there can be multiple uses of this amazing technology
including use in record keeping where high level of security and verification is required. The potential of
blockchain technology was verified by the recent news about Banks including J.P. Morgan Chase & Co.
and Citigroup Inc. testing the blockchain on credit-default swaps. This willhelp it gain a foothold in
mainstream finance which might eventually open doors for it to be used in other fields.