Blockchain: What Finance Executives Need to Know

First, let’s step back and address the questions of what the blockchain is and what makes this technology so appealing for facilitating financial transactions. The blockchain is a type of database that records digital events between parties. It acts, essentially, like a sequential spreadsheet of transactions that gets updated on a global network of computers, in a way that is auditable. This global network is a distributed ledger in which data is encrypted as it’s being written so that the transactions it contains can be safely verified by legions of other computers across the network.

The blockchain’s distributed nature is an advantage. When financial transactions are made, new blocks are added to the globally stored chain, and each block is assigned a unique “hash,” a seemingly random sequence of letters and numbers that represents a set of data. The hash makes a blockchain very secure because it’s extremely difficult to adjust a well-designed hash back into its original text. The blockchain essentially produces a loophole-proof audit trail.