The following is taken from the Harvard Business Review's
The Truth About Blockchain
How Blockchain Works
Here are five basic principles underlying the technology.
1. Distributed Database
Each party on a blockchain has access to the entire database and its complete history. No single party controls the
data or the information. Every party can verify the records of its transaction partners directly, without an
2. Peer-to-Peer Transmission
Communication occurs directly between peers instead of through a central node. Each node stores and forwards information
to all other nodes.
3. Transparency with Pseudonymity
Every transaction and its associated value are visible to anyone with access to the system. Each node, or user, on a
blockchain has a unique 30-plus-character alphanumeric address that identifies it. Users can choose to remain anonymous
or provide proof of their identity to others. Transactions occur between blockchain addresses.
4. Irreversibility of Records
Once a transaction is entered in the database and the accounts are updated, the records cannot be altered, because
they're linked to every transaction record that came before them (hence the term "chain"). Various computational
algorithms and approaches are deployed to ensure that the recording on the database is permanent, chronologically
ordered, and available to all others on the network.
5. Computational Logic
The digital nature of the ledger means that blockchain transactions can be tied to computational logic and in
essence programmed. So users can set up algorithms and rules that automatically trigger transactions between nodes.