One of the reasons for the enthusiasm around blockchain1 technology2 is the impact that it can have on currencies, record keeping, sharing of information, contracting, and creating individual identities. This technology has been brought about by progress in the fields of cryptography, computing, economics and law. While some argue that blockchain technology is as transformational as capitalism3 and could change the way governments function;4 others speculate that this technology may end with a whimper rather than a big bang.5 These are still early days and one cannot be certain whether blockchains will live up to the expectation, but the technology does have its advantages.
Before describing what a blockchain is, how it functions, the different types of blockchains, their features, and their evolution, it is important to first discuss how the world functions without blockchain technology. Presently, intermediaries mediate between the different entities and institutions wishing to enter into a transaction by providing the necessary trust to the involved parties. One could think of banks, credit card companies, or e-commerce platforms as intermediaries that resolve the issue of lack of trust between two transacting parties—buyers and sellers. These entities act as counterparties to each side, maintain a centralized database/ledger of all the transactions, facilitate sharing of information, and validate their identity. They act as the channel through which transacting parties go through to transact with an unknown entity/ individual and in return charge fees for this service provided by them.
