Blockchain Technology

A blockchain is a digital ledger that contains a continuously expanding log of transactions and their chronological order. The data structure is in the other words a ledger that may contain digital transactions, data records, and executables.

The primary purpose of blockchain technologies is to remove the need for intermediaries and replace them with a distributed network of digital users who work in partnership to verify transactions and safeguard the integrity of the ledger. Contrary to centralized systems, every member of the blockchain network holds his own copy of the ledger or can access it in the open cloud (see also Fig. 2.1).

Figure 2.1. Centralized and distributed transactional platforms: a single trusted authority manages the ledger as opposed to every member holding a copy of the ledger.

As a result, anyone in the network can have access to the historical log of the system transactions and verify their validity, enabling a high level of transparency. If central management is removed, the challenge resides in finding an efficient way to consolidate and synchronize multiple copies of the ledger. The exact process of validation and ledger consolidation varies for different types of blockchains; however, in principle, network members compare their versions of the ledger through a process intuitively akin to distributed voting, through which consensus on the valid state of the ledger is reached. These validation mechanisms are known as distributed consensus algorithms, and BlockConvey’s Proof of Authority consensus is described extensively later.