What Is A Blockchain?
- A blockchain is a technology based on a chain of sequential blocks that contain unique information (hash).
- The information of a blockchain is distributed across many different computers (distributed ledger).
- If the hash (comp. fingerprint of humans) of a blockchain is manipulated, the connection to this block is broken.
How a blockchain works
A blockchain is a chain of blocks that contain information (mostly transaction data). For this, you can imagine a real chain with links, like the one you might have hanging around your neck. The premise in the case of the blockchain is that each link is an independent block of information. In the last link, you will find the data for today. In the second to last link the data from yesterday and so on, until the first link, where you have the very first piece of information recorded in the history of that specific blockchain.
The difference between the blockchain and the chain around your neck is that each block on the blockchain is unique. Each block has its own kind of fingerprint. This is called “hash” in technical jargon. It also makes sense that each blog is unique because the information within each block is also unique. What exactly is mostly the information of a block? (Mostly) transaction data.
Since each block knows the unique hash or fingerprint of the previous block, past transactions cannot be changed because that would also require a change in the hash of the previous block. This is how the chain is created, and it is also exactly what makes the blockchain so secure. In fact, the blockchain is one of the most secure record-keeping systems ever invented in human history (more secure than investing in REITs or real estate ETFs on the stock market, especially more secure than real estate crowdfunding).
The Bitcoin blockchain
Blockchain technology became really popular when Satoshi Nakamoto used it to invent the cryptocurrency Bitcoin. For Bitcoin, the blockchain is basically a list of transactions that everyone can see on the internet. Every time, an investor makes a Bitcoin transaction, i.e. sends or receives Bitcoin in his wallet, a record is written in the Bitcoin blockchain.
This record is open and transparent to the public. So if someone would try to manipulate a Bitcoin transaction, the entire world could see it, and in addition, the change in the unique hash or fingerprint would cause the link to that faulty block in the blockchain to break. This technique makes sure that returns for investors are safer than with other record-keeping systems.
Who is in control of the blockchain?
There is no direct single entity that has control over any particular blockchain. This is what we call distributed ledger. The information on the blockchain is spread across many computers, countries, and institutions around the world. Whoever wants to participate in this decentralized network can do so, and since the entire network can see all transactions, they must first agree that each new block is correct before it is added to the blockchain (comp. proof of work). Hence, everyone controls everyone else.
This is exactly what makes a blockchain so great. It gives the power back to the people, and that is also what we do with GermanReal.Estate. We are giving people the opportunity to invest in landmark buildings in Germany with security tokens worth 1€ (minimum investment starting at usually 100€).
Therefore, we are using a new development on the blockchain called “smart contracts”. A program stored on the blockchain that is used to automatically exchange our real estate security tokens based on certain conditions. More information is in our FAQ post on the benefits of tokenized real estate.