Blockchain is a decentralized ledger of all transactions across a peer-to-peer network. It is a technology that enables Bitcoin transaction and is also applied to many business processes. For example: Bitcoin is just one application of blockchain.
It can be used to operate in a peer to peer fashion with zero intervention from third party. It is not only used for transactions but it ensures anonymity and security of the users. Blockchain is simply a chain of blocks. It is considered as the most secure way for any transaction through the network as it is nearly impossible to get hacked.
For example: In banking system, let us consider a situation where John wants to send $1000 to Kate. Now, bank is the third party here where all the processes will be verified and the transaction will take more time to terminate.
Issues in banking system:
High transaction cost.
Network fraud.
Account hacking
Financial crisis.
Solution: All of the above issues are overcome by using blockchain. Let us see the same scenario where John wants to transfer 2BTC to Kate. John will use his Bitcoin wallet where he will digitally sign in and after the miners validate the transaction, John will be able to send 2BTC to Kate's public address which is equivalent to bank's account. The amount will then be directly credited to Kate in less time.
Features of Blockchain:
Decentralized system: It is handled by individuals which ensures fairness and secure.
Distributed Ledger: Blockchain stores all the transaction records in a distributed ledger.
Incentive of validation: The transaction will be completed only if the hash code matches and the digitally signature matches.
Consensus Algorithm: It is an algorithm where miners validate the transaction which is called proof of work.
Cryptography Algorithm: Blockchain uses asymmetric key to create digital signatures.