Let’s start with the definition of Blockchain. As we can find out in Wikipedia:
A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a cryptographic hash of the previous block, a timestamp and transaction data. By design, a blockchain is inherently resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.
So taking into account all of the above, we can conclude that by itself, blockchain only provides a means of creating a secure, shared record of a transaction between two parties. We can imagine it as a room where a security camera is permanently rolling: if two people step inside that room, they will both automatically get access to the record from camera, but neither will have the ability to turn the camera off or to interfere with it in any way.
But this room will become really useful if its cameras do more than just record. Cameras must be able to understand the agreement being made between the two parties and take action to ensure that both stick to their side of the bargain.
Enter so-called smart contracts
If we talk about traditional contracts, these are written agreements between two or more parties. Each party has a copy and it also requires an external body to act as an enforcer if any disagreement occurs. But if we choose a smart contract, implemented using the power of blockchain, as a deal confirmation, we got the agreement possessing the power to exist in a space that is secure from interference by any of its signatories and it comes with mechanisms to check whether each party is keeping their side of the bargain, and to automatically trigger mutually agreed upon outcomes depending upon what it sees.
As a result, in theory, we have the ability for two parties to trade securely with each other without the help of any third entity standing between them.
The 21st century is an era of the blockchain. And all industries are constantly updated under the influence of these technologies. Owners of any type of business can’t be relaxed, and especially online marketplace business owners. The next wave of online commerce transformation is coming with the introduction of Blockchain Tech.
What will bring Blockchain and smart contracts to online marketplaces? Here you can find out the answer.