What is blockchain?

Blockchain operates as a decentralized distributed database, with data stored across multiple computers, making it resistant to tampering. Transactions are validated through a consensus mechanism, ensuring agreement across the network. 

In blockchain technology, each transaction is grouped into blocks, which are then linked together, forming a secure and transparent chain. This structure guarantees data integrity and provides a tamper-proof record, making blockchain ideal for applications like cryptocurrencies and supply chain management.

The key benefit of blockchain lies in its ability to provide security, transparency and trust without relying on traditional intermediaries, such as banks or other third parties. Its design reduces the risk of fraud and errors, making it especially valuable in industries where secure transactions are critical, including finance and healthcare. Additionally, blockchain helps businesses improve efficiency and reduce costs by streamlining processes and enhancing accountability. 

Blockchain technology began with the introduction of Bitcoin in 2008, created by an anonymous figure or group known as Satoshi Nakamoto. Bitcoin’s underlying technology was designed as a decentralized digital currency to enable peer-to-peer transactions without the need for a trusted intermediary like a bank. The blockchain served as a public ledger, securely recording all transactions and preventing double-spending, a key issue for digital currencies at the time.

 With the development of platforms like Ethereum in 2015, blockchain began to support smart contracts—digital contracts stored on a blockchain that are automatically executed when predetermined terms and conditions are met.

This development broadened blockchain’s real-world applications, extending into areas such as real estate, finance, supply chain management, healthcare and even voting systems. Over time, blockchain has grown well beyond its cryptocurrency roots, becoming a key player in decentralized finance (DeFi) and non-fungible tokens (NFTs).

Today, blockchain continues to evolve, with ongoing advancements aimed at improving scalability, privacy and its integration with emerging technologies like artificial intelligence (AI) and the Internet of Things (IoT).

According to a report from Statista, blockchain technology is forecast to grow by nearly 1 trillion U.S. dollars by 2032, with a compound annual growth rate (CAGR) of 56.1 percent since 2021.¹

Blockchain technology offers various benefits that transform businesses’ operations, enhancing trust, security, traceability and efficiency across multiple industries.

Here are some top benefits of blockchain:

• Greater trust

• Enhanced security

• Better traceability

• Increased efficiency

• Automated transactions

Blockchain technology contains several key features that enhance security, transparency and efficiency in transactions and data management:

• Distributed ledger technology

• Immutable records

• Smart contracts

• Public key cryptography

All network participants have access to the distributed ledger and its immutable record of transactions. This shared ledger records transactions only once, eliminating the duplication of effort typical of traditional business networks.

No participant can change or tamper with a transaction after it’s been recorded in the shared ledger. If a transaction record includes an error, a new transaction must be added to reverse the error, and both transactions are then visible.

Smart contracts are self-executing agreements stored on the blockchain, where the terms are written in code and automatically executed when predefined conditions are met. They can be used for various purposes, such as transferring corporate bonds or triggering travel insurance payouts. By automating these processes, smart contracts speed up transactions, reduce the need for intermediaries and ensure transparency and security.

Public key cryptography is a method used to secure transactions and data on the blockchain by leveraging two cryptographic keys: a public key and a private key. The public key serves as an address for receiving cryptocurrency or data, while the private key is a confidential key that grants control over the associated digital assets. The private key holder can authorize transactions, providing security and verifying ownership, while the public key allows others to send funds or data to the correct address.

Blockchain technology records transactions securely by linking data blocks together. Each block contains important details about asset movements and ensures the integrity of the entire process. Here’s how it works.

Each transaction is recorded as a “block” of data on the blockchain. These blocks capture key details about the movement of assets, whether tangible (such as a product) or intangible (such as intellectual property). The data within each block includes critical information, such as who, what, when, where, the transaction amount, and specific conditions like the temperature of a food shipment.

Additionally, each block contains a timestamp, which records the exact moment the transaction is added to the blockchain. This timestamp ensures the chronological order of transactions and adds an additional layer of verifiability to the data, preventing any retrospective alterations to the recorded information.

Each block is linked to the previous block and the one after it, creating a secure chain of data. This is done through cryptographic hashes, unique identifiers for each block. The hash of a block includes data from the previous block, ensuring the exact sequence and timing of each transaction. The cryptographic hash makes it nearly impossible to alter any block without changing all subsequent blocks, ensuring the integrity of the entire process.

The blocks are grouped together in an irreversible chain known as a blockchain. Each new block reinforces the security and validation of the previous one, strengthening the entire chain. This makes the blockchain tamper-evident, ensuring malicious actors cannot alter or insert fraudulent transactions into the chain.

Nodes in the blockchain network validate and maintain the blockchain by confirming each transaction’s validity through consensus algorithms, ensuring the system remains secure and immutable. Proof of Work (PoW) and Proof of Stake (PoS) are some of the most commonly used consensus algorithms in blockchain networks, each helping to secure the system while validating transactions.

With each new block, the blockchain becomes more secure, making it nearly impossible to change past transactions. This immutability provides a trusted, transparent ledger that all network members can rely on, preventing fraud and ensuring that all transaction records are accurate and unchangeable.

There are several ways to build a blockchain network. They can be public, private, permissioned or consortium-built:

• Public blockchain networks: A public blockchain is open for anyone to join and participate in, such as the Bitcoin blockchain. While it offers decentralization, it also comes with drawbacks, including high computational power requirements, lack of transaction privacy and potentially weaker security. These considerations are crucial, especially for enterprise blockchain use cases.

• Private blockchain networks: A private blockchain network, similar to a public blockchain network, is a decentralized peer-to-peer network. However, one organization governs the network, controlling who is allowed to participate, run a consensus protocol and maintain the shared ledger. Depending on the use case, this can significantly boost trust and confidence between participants. A private blockchain can be run behind a corporate firewall and even be hosted on premises.

• Permissioned blockchain networks: Businesses that set up a private blockchain will generally set up a permissioned blockchain network. It is important to note that public blockchain networks can also be permissioned. This places restrictions on who is allowed to participate in the network and in what record transactions. Participants need to obtain an invitation or permission to join.

• Consortium blockchain networks: A consortium blockchain network is managed by a group of preselected organizations that share the responsibility of maintaining the blockchain. These organizations determine who can submit transactions and access data. This type of network is ideal when multiple parties need to collaborate with shared responsibilities, such as in the energy sector, where multiple energy producers and consumers might share data about power usage and distribution.

Blockchain protocols are the set of rules that govern how data is recorded, shared and secured within a blockchain network. These protocols establish the foundation for the network’s operation. However, to fully take advantage of these protocols, developers need a platform that provides the environment and tools to build, deploy and interact with decentralized applications (dApps).

Blockchain platforms, therefore, build on top of these protocols, offering the necessary infrastructure and services to create and run apps within the blockchain ecosystem. While protocols define the core functionality, platforms extend this functionality by enabling the development of practical solutions.

Blockchain protocols and platforms often overlap, as platforms usually rely on specific protocols to operate.

Here’s a rundown of common blockchain protocols and platforms:

• Hyperledger Fabric

• Ethereum

• Corda

• Quorum

Hyperledger Fabric, an open-source project from the Linux® Foundation, is the modular blockchain framework and has become the unofficial standard for enterprise blockchain platforms like the IBM Blockchain® Platform. Intended as a foundation for developing enterprise-grade applications and industry strategies, the open, modular architecture of Hyperledger Fabric uses plug-and-play components to accommodate a wide range of business use cases.

Ethereum is a decentralized, open-source blockchain platform that allows developers to build and deploy smart contracts and decentralized applications. Ethereum Enterprise is designed specifically for business blockchain applications.

Corda is a distributed ledger platform designed for businesses, enabling secure and private transactions on permissioned networks. It allows organizations to share data and execute agreements with only the relevant parties, making it ideal for industries like finance, healthcare and supply chain management. Corda prioritizes privacy, scalability and regulatory compliance.

Quorum is an open-source, permissioned blockchain platform based on Ethereum, designed for enterprise use. It provides high privacy and scalability, allowing businesses to run smart contracts and conduct transactions securely within a private network. Quorum supports features like transaction privacy and faster consensus mechanisms, making it ideal for financial institutions where confidentiality and regulatory compliance are crucial.

When building an enterprise blockchain application, it’s essential to have a comprehensive blockchain security strategy that uses cybersecurity frameworks, assurance services and best practices to reduce risks against attacks and fraud. This strategy should encompass key areas like identity and access management (IAM), ensuring only authorized users can access critical components, and utilize strong encryption techniques for data protection. In addition, adopting effective consensus mechanisms that are resistant to attacks is crucial for maintaining the integrity of the network.

Other important security imperatives include the following:

• Regularly audit and test smart contracts for vulnerabilities, as flaws in their code can lead to serious security breaches.

• Comply with industry regulations, such as GDPR or financial standards, using privacy-enhancing technologies like zero-knowledge proofs.

• Integrate secure messaging protocols to facilitate confidential communication within the blockchain-based network, ensuring that messages and transactions remain private and tamper-proof.

• Utilize continuous monitoring and a well-defined incident response plan to ensure that any security issues are detected and addressed promptly, minimizing the impact of potential threats.

Bitcoin is the first decentralized digital currency to enable peer-to-peer transactions without a central authority. It uses blockchain technology as its underlying infrastructure, acting as a distributed ledger that records and verifies all Bitcoin transactions.

As the most well-known cryptocurrency, Bitcoin plays a central role in the blockchain ecosystem, but it’s also part of a much larger and evolving market. The pricing in the Bitcoin and cryptocurrency space is highly volatile, with factors such as technological advancements, market sentiment, investor demand and regulatory changes playing a significant role.

Combining blockchain and AI creates new opportunities for businesses across various industries. Using blockchain’s immutable ledger and decentralization, AI can improve data transparency and security, addressing challenges like explainable AI.

For example, in supply chain management, blockchain ensures the traceability and authenticity of products, while AI analyzes data to predict demand and optimize logistics. AI helps automate risk assessments in financial services, while blockchain secures transactions and ensures compliance.

Beyond these applications, the integration of blockchain and AI is also making significant strides in industries like healthcare. Healthcare providers are using AI to analyze patient data for personalized treatments and blockchain solutions to ensure the privacy and security of medical records. This convergence enhances trust, boosts efficiency and supports process automation, leading to faster, more reliable business operations across industries.