The blockchain is similar to a permanent book of records that keeps a log of all transactions that have taken place in chronological order.
Let’s envision a bank transaction in which there are three parties: the sender, the bank, and the recipient. In order to ensure that there are no fraudulent transactions, the bank acts as the central authority between the parties.
The blockchain also logs transactions between senders and receivers, except there is no bank or central authority. Instead, the blockchain relies on a public network of computers to verify the transaction. The blockchain is just an accurate, and permanent record of all the transactions that have happened amongst the members in that blockchain’s network. In this analogy, each block in the blockchain represents a transaction, and each transaction is connected to the prior transaction to form the entire connected blockchain.
- Block: A block is an individual transaction or piece of data that is being stored within the blockchain.
- Blockchain: A blockchain is a continuously growing list (“chain”) of records (“block”), called blocks, which are linked chronologically and secured using cryptography.
The image shows how bank transactions can be easily represented in the blockchain. The sender and recipient, as well as the transaction, is stored inside the block and is chained together with other transactions that occurred before and after it.