Definition of Blockchain

What is a Blockchain?

Video: Bitcoin's blockchain technology explained in 2 minutes

Blockchain Definition from Financial Times Lexicon

Blockchain description

A Blockchain is a peer-to-peer public ledger maintained by a distributed network of computers that requires no central authority or third party intermediaries. It consists of three key components: a transaction, a transaction record and a system that verifies and stores the transaction. The blocks are generated through open-source software and record the information about when and in what sequence the transaction took place. This “block” chronologically stores information of all the transactions that have taken place in the chain, thus the name blockchain. In other words, a blockchain is a database of immutable time-stamped information of every transaction that is replicated on servers across the globe. 

Blockchain technology is the foundation of and underpins bitcoin, a decentralized digital cryptocurrency.
In traditional transactions such as money transfers or foreign currency, there is usually an intermediary or a centralized entity that records the transmission of money or currency that exist apart from it. In a blockchain, the token or digital coin itself is what has value, which is determined by the market. This is what makes the system a truly decentralized exchange. When people buy or sell bitcoins, a secret key or token is broadcast to the system. “Miners” use nodes, computers or devices linked to a network, to identify and validate the transaction using copies of all or some information of the blockchain. Before the transaction is accepted by the network, miners have to show “proof of work” using a cryptographic hash function –a special algorithm- that aims to provide high levels of protection. Miners receive some form of compensation for their computing power contribution, avoiding the need to have a centralized system. Newer protocols such as Ripple rely on a different consensus process that does not need miners nor proof of work and can agree on the changes to the blockchain within seconds. 

Blockchain disruption in banking and finance

The first levels of disruption would seem more likely in the payments space where traditional transactions such as money transfers, credit and debit card payments, remittances, foreign currency and online payments, require an intermediary such as a clearing house or a financial institution. In these cases the transaction would occur directly between the buyer and the seller without any intermediary and the validation of the transaction would happen in a decentralized way or “distributed ledger”. This would result in significant infrastructure savings for banks by allowing them to bypass payment networks that are oftentimes slow, cumbersome, and expensive.

However, the biggest potential impact of a public ledger may extend beyond the payment system. Given that the majority of financial assets such as bonds, equities, derivatives and loans are already electronic it may be possible that someday the entire system is replaced by a decentralized structure. In fact, the latest innovations are using tokens to store and trade assets like shares, bonds, cars, houses and commodities. These so-called “colored coins” attach additional information on the asset, generating “smart property” or the ability to record and transact these assets using “smart contracts”, which are enforced by complex algorithms, through distributed platforms without a centralized register, thereby increasing efficiency. In this environment, the current system where financial institutions record individuals’ accounts in a centralized fashion and the banks’ reserves are stored by the central bank (ie. The Federal Reserve or The Bank of England) would be replaced by the “internet of money” or the “internet of finance” – a fully decentralized and independent financial system. 

Source: read full article:
Blockchain Technology: The Ultimate Disruption in the Financial System 
...published by BBVA research

And, what about the Blockchain future?
“blockchain technology…is presented as a piece of innovation on a par with the introduction of limited liability for corporations, or private property rights, or the internet itself” (The Economist)