A blockchain is a decentralized and distributed digital ledger technology that is used to record transactions across many computers. In the simplest of terms, a time-stamped series of immutable records of data that is managed by a cluster of computers not owned by any single entity. Each of these blocks of data is secured and bound to each other using cryptographic principles to form the chain of blocks.
A solid blockchain network has no central authority. Since it is a shared and immutable ledger, the information in it is open for anyone and everyone to see. Anything that is built on the blockchain is by its very nature transparent and everyone involved is accountable for their actions. Centralized systems have been corrupted time and time again by those in power and by their centralized nature are very vulnerable to attacks. Decentralized Blockchains by nature are a system of checks and balances in terms of control and the nature of being open has them constantly under attack so the longer they operate the stronger they become.
A blockchain carries no transaction cost in the traditional sense (as you’re not paying any centralized institution to transfer your funds), just an infrastructure cost. The blockchain is a simple yet ingenious way of passing information from one place to another in an automated and safe manner. One party to a transaction initiates the process by creating a block. This block is verified by thousands of computers distributed around the world. The verified block is added to a chain, which is stored across the net, creating not just a unique record, but a unique record with a unique history. Falsifying a single record would mean falsifying the entire chain in millions of instances. That is virtually impossible. Bitcoin uses this model for currency transactions, but it can be deployed in many other ways.
Blockchain can also replace all processes and business models which rely on charging a small fee for a transaction, or any other transaction between two parties. Many businesses including banks and credit card companies are considered vampire companies in that they exist to be the middleman and drain a fee for facilitating a service. Even title and loan companies for real estate can be replaced with blockchain technology. Blockchain may make selling recorded music profitable again for artists by cutting out music companies and distributors like Apple or Spotify. The music you buy could even be encoded in the blockchain itself, making it a cloud archive for any song purchased. Because the amounts charged can be so small, subscription and streaming services will become irrelevant. It goes further. Ebooks could be fitted with blockchain code. Instead of Amazon taking a cut, and the credit card company earning money on the sale, the books would circulate in encoded form and a successful blockchain transaction would transfer money to the author and unlock the book. Transfer ALL the money to the author, not just meager royalties. You could do this on a book review website like Goodreads, or on your own website. The marketplace Amazon is then unnecessary. Successful iterations could even include reviews and other third-party information about the book.
In the financial world the applications are more obvious and the revolutionary changes more imminent. Blockchains will change the way stock exchanges work, loans are bundled, and insurances contracted. They will eliminate bank accounts and practically all services offered by banks. Almost every financial institution will go bankrupt or be forced to change fundamentally, once the advantages of a safe ledger without transaction fees is widely understood and implemented. After all, the financial system is built on taking a small cut of your money for the privilege of facilitating a transaction. Bankers will become mere advisers, not gatekeepers of money. Stockbrokers will no longer be able to earn commissions and the buy/sell spread will disappear.
There are 5 main pillars (as defined by Andreas Antonopolous) of blockchains that determine the strength and integrity of a blockchain, open, borderless, neutral, censorship-resistant, and public:
1. Open - Anyone can access and participate in it without the need for authorization and vetting.
2. Borderless - Just like the internet, there are no borders. Blockchain is everywhere you are in the world.
3. Neutral - Sending and receiving are neutral on all sides. Does not matter who the sender is, who the receiver is, or what the reason for the transaction is.
4. Censorship-Resistant - no force or entity can stop a transaction from happening. It is truly peer to peer with no central authority that can stop, prevent, or alter a transaction or any other data on the blockchain.
5. Public - everything that is done is verifiable on the network by every other user. This allows transparency for everyone to see what has happened.