A blockchain is a distributed ledger or decentralized database shared among different parties, where each party can add information. The blockchain can be used as a ledger of assets and transactions across many computers in a network. For use as a distributed ledger, it is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded on the chain, the data cannot be altered retroactively without alteration of all subsequent blocks and the collusion of the network majority.
Blockchain-based systems can be decentralized. For example, a blockchain might store items in the form of digital assets such as Bitcoin, or it can store data in the form of records written by users and authenticated by non-users. A blockchain could be used to record the ownership and transfer of physical objects such as prescription medicines, automobile titles or company equity. A blockchain could extend voting rights and assure that digital credentials for domain names are not altered without consent.
A blockchain could be used to store a transparent description of fact or events. A blockchain could be used as a platform for crowdfunding and crowd investing in the form of equity tokens, debt tokens and non-equity tokens. Tokens represent an e-asset issued by the issuer and represent an agreement between the issuer and its token holders. Tokens can be traded on a distributed ledger among participants in the network, who agree to collect dividends based on the profitability of their participation, much like treasury shares in corporate resolutions. The distributed ledger could store rules for self-executing smart contracts.
A blockchain can secure the process of electronic payments without central authorities and ensure the transfer of electronic cash where only the payee and payer are involved, without a third party. A blockchain can be used to create a real-time audit trial balance as transactions are processed, while providing a single source of information that is secure from any attempt to alter or falsify records. The blockchain does not use centralized control functions, such as clearinghouses or auditing.
A distributed ledger can be used to distribute consensus data and validate the validity of blocks and transactions. The blockchain could be used to ensure that every participant has validated transaction records for each transaction. Such a method could be used for recording proofs of existence or custody in case of a dispute over ownership.
A blockchain could use the proof-of-work adjustment algorithm to provide a secure distributed timestamp server, eliminating the need for the third-party services such as a central time server.
A blockchain could be used to create a secure audit trail for auditing digital rights management.
Blockchain can be used to make smart contracts. Blockchain offers the promise of the automation of processes and transaction settlement, with greater transparency and fewer errors made eliminating the need for processing by personnel in a central location. In finance, smart contracts are automated processes that execute pre-determined actions based on input from multiple sources from the Internet or data received from external sensors using blockchain technology.
