The concept of the blockchain is attributable to one or possibly a group of persons who first described this concept in 2008, in a bitcoin white paper authored under the pseudonym Satoshi Nakamoto. According to this description, the blockchain is a decentralized booking system through which any kind of property rights can be digitally organized.
The European Securities and Markets Authority (ESMA) defines blockchain as a distributed database that enables trading or business partners without any reason to trust one another to process transactions via a peer-to-peer network without the involvement of an intermediary. The focus here is the use of cryptographic encryption (e.g. through the use of private and public "keys" or "hash functions"). Blockchains can be used to store ownership rights in connection with positions, goods, or other assets. However, ownership is identified not via the names of protagonists but through unique and unfalsifiable key pairs.
As the name implies, a blockchain is a chain of blocks. Various transactions are amalgamated into blocks before then being chronologically chained together by means of a cryptographic procedure. This has the effect of ensuring that previous transactions cannot be retrospectively modified. The saving of the associated transaction history does not take place at a central location. Instead it is separately archived by each network participant. Permanent matching or synchronization with other participants in the network prevents attempts at manipulation. The "definitive" blockchain is always the longest chain of blocks.
Overall, blockchain technology is capable of significantly changing the process of trading as we understand it today. One example of how monetary and payment processes can be reinvented by means of a blockchain is Bitcoin.
Security: The compromising of transactional data is almost impossible, which makes blockchains suitable for any scenario in which critical information is to be exchanged (e.g. banks, logistics, public authorities or healthcare).
Cost savings: As no intermediaries need to be involved, the cost of involving third parties or external bodies is eliminated.
Traceability: Historic transaction data can help establish the genuineness of products or assets, including their origins or creators.
Accuracy, consistency and transparency: The modification of individual transaction datasets requires a change to all subsequent datasets and the approval of the entire network.
Greater transaction speed: Complex trading transactions involving several parties are prone to error and delay. Distributed ledger technology facilitates lower friction losses; clearing and settlement can be effected more quickly.