A blockchain, also known as a distributed ledger, is a shared, immutable database designed specifically for securing and transferring financial assets. Unlike a traditional database that manages balances on behalf of users, the assets on a blockchain are controlled directly by the owners of those assets through the use of secure, cryptographic keys.
By analogy, a cryptographic private key is similar to a physical key that secures a safety deposit box. And a blockchain is like a virtual network of these safety deposit boxes. When an entity wants to spend their money, they take their key, open their box, select the amount they wish to spend, and deliver those funds into the box of the recipient. The recipient is now in control of those funds since they hold the key to their box.
Why does this matter? Because when asset owners remain in control of their assets, they can move them directly to counterparties over a network without depending on intermediaries.
This new, more secure model of financial infrastructure reduces the costs and risks of asset movement to market participants in industries as varied as payments, banking, capital markets, insurance, trade finance, and supply chains. It also enables the creation of new types of financial products and services that were never before possible.