Blockchain in 100 words
Blockchain? This has something to do with Bitcoin! Although the technology is more than a decade old, there has been no conclusive definition of blockchain yet. The blockchain belongs to the Distributed Ledger Technologies, which literally corresponds to a distributed general ledger. This describes it very well. In the following we abstract the functionality of a blockchain in 100 words. In further articles we will deepen the topic and illuminate it from different perspectives.
A blockchain is an unchangeable list of transactions in a distributed network. Users can make list entries. These are stored by many network nodes and validated by multiple parties (miners). Each list entry (transaction) of a subscriber contains an individual digital signature. The entries are stored by all network nodes, combined into transaction blocks and sequentially linked together (chain). A consensus mechanism is used to validate transactions. In the classic case (Proof-of-Work), a digital fingerprint (Hash) is calculated from each transaction block, which in turn is integrated into the next block and thus links the blocks in a certain order. The result is available to all network nodes, so past transactions can no longer be changed.
The blockchain, which is considered the technology behind Bitcoin, was first described in a white paper by Satoshi Nakamoto. The decentralized network described here solves the so-called double-spending problem for the first time by using cryptographic methods to ensure that digital assets or transactions cannot be made more than once. The proof-of-work mechanism ensures that all actors have an economic incentive to behave correctly.
However, the original idea of the blockchain has some disadvantages due to its high energy consumption and limited privacy. This is why there are now different types of distributed networks, the so-called Distributed Ledger Technologies. These sometimes use more energy-efficient consensus mechanisms or allow for higher privacy. In the following articles we will discuss the different types of blockchains as well as their advantages and disadvantages.
mm1, the consultancy for connected business supports companies from the idea generation to the choice of technology and partners to the realisation of your blockchain initiatives.
This article is part of an article series on blockchain technology. Read more articles from our blockchain team:
- Blockchain in 100 words
- 6 Myths about blockchain
- Distributed ledger taxonomy
- Application areas of blockchain technology
- The token economy
- mm1 blockchain use case assessment
- Blockchain in the mobility sector
- mm1 roadmap for blockchain initiatives
Uwe Klötzner brings 14 years of consulting experience, particularly in service industries (finance, telco, energy). He is an expert in implementing digital transformation of business models and IT landscapes. Uwe has many years of experience in the management of complex programs and projects as well as in the design and optimization of business processes. He reliably delivers projects with structure, binding communication and strong identification.
Raphael Iten is an experienced entrepreneur in the field of sustainability management. Through his experience as a consultant in outsourcing projects in the insurance sector and platform construction for telcos, he considers and combines different approaches to solutions. Thanks to his curiosity and speed to grasp new tasks as well as his passion to analytically structure problems, he recognizes and prioritizes the important interrelationships.
