The purpose of the blockchain is to allow data to be stored in a decentralized manner, while allowing anyone to verify the authenticity of a blockchain. This is based on the fact that the use of various cryptographic operations throughout the blockchain make it nearly impossible to create a fake blockchain that would be acceptable as the real blockchain. This means that people can request a copy of the blockchain from anyone else and trust its authenticity without needing to trust their source at all.

The blockchain is at the heart of a variety of new technology taking advantage of its decentralized and trustless nature. The original and most common applications are cryptocurrencies, which, at a minimum, allow people to send or store value (money) through transactions recorded on the blockchain. Cryptocurrencies have grown since to offer the ability to perform other services with built-in support for paying service providers with the blockchain’s cryptocurrency. Other applications have also grown up to use the blockchain without the cryptocurrency aspect.

What makes Blockchain Technology Special?

The blockchain is the big new thing and it seems like all industries are looking into how it can revolutionize how they do business. But what makes the blockchain so special?

Decentralized​

Decentralization is one of the major goals of the blockchain. When Satoshi Nakamoto created Bitcoin and blockchain, he was concerned about the centralization of power in the financial industry. At the time, the Great Recession was in effect and the global economy was suffering due to the choices of a few. In response, Satoshi Nakamoto created Bitcoin and, with it, blockchain.

The blockchain is decentralized since all of its infrastructure is distributed over multiple nodes, all of which are capable of supporting the blockchain on its own. However, the decentralization is also intended to remove any possibility that any node or set of nodes could control the network. All this means is that the failure or decisions of any part of the network will not cause the network to fail.

Trustless

A lot of business, especially in the financial industry is based on trust. When you put money in the bank, you trust them to give it back to you when you ask for it. You trust the organizations in charge of managing your currency to make decisions that allow it to retain its value rather than inflating to the point of worthlessness. You trust that any organization that you give personal data to will properly care for it and won’t lie about it when asked.

Blockchain technology makes it possible to remove the requirement for trust in a centralized organization from many systems. For example, in banking your money is recorded in an internal ledger that you trust the bank to keep accurate. In blockchain, the ledger is publicly managed and stored in so many locations that it is infeasible for someone to successfully falsify it.

The design of the blockchain also makes it possible to trust the public ledger without trusting those who store it. Each piece of information in the blockchain is secured using cryptography and the different pieces are interwoven in a way that makes forging the blockchain infeasible but verifying it easy. This is one of the major contributions of blockchain technology since no other system in existence offers these benefits. Before blockchain, you either needed to store a copy of the ledger yourself or trust the person who does.

Secure

​In most cases, if you give your data to someone, you’re trusting them to take proper care of it. You don’t always have the ability to audit how they secure their systems or the authority to order them to make changes to improve security. You don’t know how well or if your data is secured or what’s happening with it.

On the blockchain, security measures are all out in the open. All security assumptions are based on the strength of cryptographic algorithms. If someone manages to break one of these algorithms, then the security of the blockchain will fail. However, this is unlikely since every algorithm is public and has been publicly audited (unlike your cloud service provider’s servers) and, even if the breach happens it will be obvious, so you’ll know it happens. This increased visibility and transfer of trust from organizations and corporations to publicly reviewed cryptographic algorithms represents a higher level of security available.