Blockchain technology is a type of distributed ledger technology (DLT). A distributed ledger is essentially a database that is shared across a network of users. And its unique feature is that it allows people who have no reason to trust each other to transact, without a trusted authority managing the records.
source: linkedIn
All participants within the network have their own identical copy of the ledger and any changes to the ledger are reflected in all copies. The security of the assets stored in the ledger are maintained cryptographically through the use of ‘keys’ and digital signatures. Entries are updated by the participants according to rules agreed by the network. This process is what is known as “mining” – a simplified explanation of which follows.
When a transaction takes place - for example, somebody buying something using Bitcoin - a notification is sent out across the network. Computers compete to solve a mathematical problem or algorithm that checks whether the transaction is valid (i.e. that the buyer has the funds). These computers churn out code-upon-code (known as hashes) until they find a combination which confirms that the transaction is valid. This is called "proof of work” and takes so much processing power that generating false entries becomes prohibitive. In return for verifying the transaction, the computer that is the first to solve the mathematical problem receives 12.5 Bitcoins (and a transaction fee). This is acutally how new Bitcoins are created.
source:bitcoinlead.org
Transactions are bundled together and added as a “block” to a chain which records all previous transactions. This blockchain gets longer as more transactions take place. What makes it so secure is that each new block is written using the code of all previous blocks. If someone wished to make a change at a point in the chain, they would not only have to re-write the code for that block, but also the code for every single subsequent block. Since this uses a huge amount of computing energy, it is practically impossible. The fact that the blockchain is public also reinforces its security. An altered version of the blockchain would be rejected by other users who could see a fraudulent change.
