Blockchain technology

Definition

Blockchain technology is a decentralized digital ledger system that records transactions across many computers in such a way that the registered transactions cannot be altered retroactively. This ensures transparency, security, and trust among parties involved in transactions without the need for a central authority. By enabling peer-to-peer interactions and providing a tamper-proof way to store data, blockchain technology is considered a disruptive force in various industries, similar to advancements like artificial intelligence.

5 Must Know Facts For Your Next Test

1. Blockchain technology enables secure and transparent record-keeping by creating an immutable chain of blocks that store transaction data.
2. Each block in a blockchain contains a unique cryptographic hash of the previous block, linking them together and enhancing security against tampering.
3. The decentralized nature of blockchain means that no single entity has control over the entire network, reducing risks associated with centralized systems.
4. Smart contracts on blockchain platforms automate processes and reduce the need for intermediaries, which can streamline operations and lower costs.
5. Various industries are exploring blockchain applications beyond finance, including supply chain management, healthcare, and voting systems for enhanced security and efficiency.

Review Questions

• How does blockchain technology ensure security and transparency in transactions compared to traditional systems?
  • Blockchain technology enhances security and transparency by creating an immutable record of transactions that is distributed across many computers. Unlike traditional systems where a central authority maintains control and can potentially alter records, blockchain's decentralized nature makes it difficult for any single party to manipulate transaction data. Each block contains a cryptographic hash of the previous block, ensuring that any changes would require altering all subsequent blocks, thus deterring fraud.
• Evaluate the impact of smart contracts on business processes and how they relate to blockchain technology.
  • Smart contracts significantly transform business processes by automating agreements without the need for intermediaries. Built on blockchain technology, these self-executing contracts execute actions when predetermined conditions are met, reducing the time and costs associated with traditional contract execution. This automation not only streamlines operations but also increases trust among parties by ensuring that contract terms are transparently recorded and enforced on the blockchain.
• Assess the potential implications of blockchain technology on global supply chains and identify key areas where it may drive change.
  • Blockchain technology has the potential to revolutionize global supply chains by enhancing traceability, reducing fraud, and improving efficiency. By providing an immutable record of each transaction throughout the supply chain, stakeholders can track the movement of goods in real-time, ensuring authenticity and compliance. Key areas of change include enhanced transparency in sourcing materials, improved inventory management through real-time data access, and stronger accountability among suppliers. This shift could lead to more sustainable practices as companies can verify claims related to ethical sourcing and environmental impact.

Related terms

Cryptocurrency: A digital currency that uses cryptography for security and operates on blockchain technology, allowing for secure and anonymous transactions.

Smart Contracts: Self-executing contracts with the terms of the agreement directly written into code, which run on blockchain platforms and automatically enforce agreements.

Decentralization: The distribution of authority away from a central entity, enabling individuals or nodes to have more control over transactions and data within a network.