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What Is Blockchain?

Blockchains are decentralized, digital databases that run on a massive network of computers.

🤔 Understanding Blockchain

Best known for their role in recording cryptocurrency transactions, blockchains store encrypted information in “blocks” that connect in a “chain.” Their decentralized networks, public ledgers and confidentiality make blockchains invaluable for storing information and digital assets.   

What is a Blockchain?

Basically, a blockchain is a system of recording information securely, yet publicly. Unlike regular databases, blockchains string together information in units called blocks. When each block “fills up,” it’s time stamped and linked to the previous block, forming the next link in the chain. This allows blocks to serve as accurate recordkeepers, or ledgers. 

How Do Blockchain Networks Work?

Blockchain networks are maintained by a system of computers called nodes. Whenever a new block links to the chain, the network duplicates and distributes the information. This allows the whole record to be stored at multiple access points. 

Such decentralized databases use this “distributed ledger technology” (DLT) to record transactions with irreversible signatures called hashes. While hashes are encrypted for user privacy, the DLT makes the existence of transactions public record. And because information is stored at several nodes, it’s harder to hack or cheat the blockchain. 

What this means for you

Blockchain technology was originally created to make digital money more secure. Because DLTs spread responsibility to everyone who runs a node or uses cryptocurrency, no one person is “in charge.” And due to blockchains being public records, it’s difficult to hack, fake or double-spend cryptocurrencies. 

The rise in blockchain and crypto usage has seen the price of a few cryptos—mainly Bitcoin—soar in recent years. Cryptos’ increasing popularity also means that more companies and countries have begun accepting them as legitimate currency. 

But a blockchain is useful for more than just financial transactions. They can store all kinds of data, like legal contracts, IDs, books, and company information. Already, some companies have begun to adopt blockchains into their networks to make business run faster and cheaper. 

Some have also proposed—or begun using—blockchains for other purposes, such as:

  • Tracing food products through shipping networks, making it easier to track foodborne illnesses
  • Moving money faster and safer in banking
  • Protecting patient records and privacy in healthcare 
  • Storing property records and other public information
  • Facilitating a modern, secure voting system

Properly implemented, blockchains can make these operations more secure, efficient and cost-effective. That translates into more investment opportunities on your end, from buying into companies that build blockchain tech to those that mine coins. And every time a company uses blockchain technology to become more efficient, it stands to become more valuable, spreading investment opportunities far beyond the blockchain itself. 

Disclosures

Q.ai is the trade name of Quantalytics Holdings, LLC. Q.ai, LLC is a wholly-owned subsidiary of Quantalytics Holdings, LLC ("Quantalytics"). Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC ("QAI"), an SEC-registered investment advisor. QIA’s investment advisory services are ONLY available only to residents of the United States. Disclosures concerning QIA’s investment advisory services are available on its Form ADV filed with the SEC. The content in this newsletter is for informational purposes only and does not constitute a comprehensive description of Q.ai's investment advisory services.

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