

What is blockchain technology?

How blockchain works, who's using it and why it's much more than just bitcoin.


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What is blockchain?




blockchain infographic


Another problem that blockchains solve is the issue of trust.

When parties make a transaction via the blockchain, they only need to place trust in the underlying infrastructure of the blockchain rather than in each other. Since a decentralized computer network can record and verify each transaction as well as make the transaction transparent, trust is created by default.

This means that a blockchain allows for “trustless” transactions. The transacting parties do not need to worry about trust because they give total trust to the network. In other words, using a blockchain means putting your trust in computers, rather than people who could have bad intentions or might simply make a mistake.

How does blockchain work?

A blockchain works by keeping an unchangeable (immutable) record of transactions. It does this by reaching a consensus between all the computers, or nodes, on the network. Because blockchains consist of a distributed network of computers with no central authority, the majority of the nodes must agree to any addition to the blockchain (adding the next block). No one party can make any changes, which is what makes a blockchain a decentralized system. The more nodes that join the network, the more decentralized it becomes, which in turn improves security.



What problems does blockchain solve?

On a trustless network like a blockchain, you can ask for payment from someone you’ve never met, and when the payment arrives, you can be sure that it is legitimate and verified, all within a matter of minutes. Existing systems such as the SWIFT banking network currently take two to three days to do this.

Another issue blockchains solve is the double-spend problem. The double-spend problem centers around the idea that on a database, someone can make an entry and then go back and change it if they have the power or authority to do so. This would essentially allow someone to spend the same money twice.



What else can a blockchain do?



Public vs. private blockchains


Private blockchains differ to public blockchains in that the nodes which operate and secure the network are privately chosen. This means that the network is effectively centralized due to the ownership of nodes by a single entity or a consortium of private parties.

Blockchain purists argue that this goes against the fundamental purpose of a blockchain, which is to be decentralized. Because decentralization is a cornerstone of blockchain security and integrity, the argument is that by centralizing all the nodes there is almost no point in running a blockchain.

Private blockchains, of course, have a place otherwise, people wouldn’t use them. Despite the concerns around centralization, they are often faster and can process more transactions per second than public blockchains. Furthermore, the organizations using them may have less need for the benefits that a decentralized network confers.




Who uses blockchains?




  • American Express. Payments provider American Express is tapping into blockchain to improve their customer rewards experience. The company uses the Hyperledger platform to enable merchants to create their own customized Membership Rewards programs for American Express users.
  • Ford Motor Co. Car manufacturer Ford has patented a blockchain system that uses a cryptocurrency to allow vehicles to communicate and transact with each other. Ford imagines the technology could be used to allow driverless vehicles to coordinate traffic and even let cars purchase “fast lanes.”
  • Bank of America. Bank of America thinks blockchain is going to be the next big industry, predicting that the technology will become a billion-dollar market. They’ve invested on that prediction too, filing nearly 50 patents already, according to CTO Catherine Bessant.
  • Microsoft: Microsoft offers blockchain services such as Corda, Hyperledger and Ethereum through their cloud computing system Azure. While Microsoft offers blockchain services to a long list of third-party clients, they have also put their money where their mouth is. Microsoft’s video game platform Xbox uses blockchain to settle publisher royalties almost instantly, replacing their previous system, which typically took 45 days to settle.

Issues with blockchain

Identifying issues with blockchain technology really depends on where you sit and the particular blockchain. Critiques often revolve around speed, issues of centralization (or decentralization), adoption, complexity and privacy. Some of these issues have fairly simple solutions, such as choosing a private blockchain to increase privacy or creating a new interface to improve usability.



This three-way trade-off among scalability, decentralization and security has become known as the Blockchain Trilemma.

Must read: The Blockchain Trilemma

The Blockchain Trilemma refers to the existing problem in blockchains where any improvement to scaling, decentralization or security cannot be made without a detrimental impact on at least one of the other two. Many blockchains have tried to solve the trilemma, only to improve in one area but lose out in another.




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2 Responses

  1. Default Gravatar
    PeterJuly 19, 2019

    I have two blockchain accounts. The first one was creditied with 1000 USD, the second account was creditied with totally 3000 USD. With the exception of approx. 50,00 UISD Balances of both accounts disappeared. Apparently the amounts were sent to another wallet which is not under my control. A screenshot of my transactions can be made available. Brgds

    • Avatarfinder Customer Care
      fayemanuelJuly 20, 2019Staff

      Hi Peter,

      Thanks for contacting Finder.

      Please note that we are a comparison website and we can not vouch for a company as we do not represent any of the providers on our page. Please contact your digital currency exchange provider to look it to this. If you believe that it was a scam, you may report it to the proper authority.

      Kind Regards,


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