Wed. Nov 30th, 2022

What is the blockchain?

The blockchain is a publicly distributed record of confirmed transactions. Whenever there is a transaction from point A to B it is confirmed and then added to the blockchain. There is no central server that confirms transactions. Instead, any computer on the network can confirm transactions and, in return, will receive a reward. A computer that is set up to confirm transactions is called a mine. Bitcoin miners are simply people who verify transactions. A transaction needs to be confirmed by multiple computers (ie. miners) before it is added to the blockchain.

Multiple transactions are usually being confirmed on a block by these computers at the same time. Once it is ready the block is then permanently added to the blockchain. As the blockchain grows it becomes increasingly harder to hack because any computer that tries to change anything on the blockchain would have to redo all the previous work and outpower the other computers on the network.

The transactions are encryped with private and public keys. Only the person sending the money has the private key but they send the public key with the transaction. The miners then solve a cryptic puzzle in order to get the right answer. When they get the right answer the transaction is confirmed.

The blockchain is not stored on a central server or location. Instead it is distributed amoung anyone who wants to download it. These computers that download and provide the blockchain to the network are called nodes. If one node tries to upload a different or modified blockchain (as in the case of an attempted hack) the rest of the network would simply reject that node.

It is important to note that many cryptocurrencies use their own blockchain but some cryptocurrencies share the same blockchain. Bitcoin has it’s own but others such as Ethereum provide a platform for other cryptocurrencies to use its ledger for their own services.

The idea of blockchain is to decentralize the transaction process, eliminating the need for a trusted third party and enabling two people to process transactions on a peer-to-peer, or person-to-person basis. As this technology grows it can be applied to more than just currency. Other uses for the blockchain could be land and vehicle registry, legal contracts, and copyrights.. just to name a few.

Just like driving a car or using your cell phone, you don’t necessarily need to know the technology behind the scenes or know how it works exactly. You’ll only want to know how to use it. But knowing what the diriving force behind all cryptocurrencies are will help makes things a lot easier. Each cryptocurrency has a whitepaper describing in detail how it’s technology works. If you would like to learn more about a specific cryptocurrency you can read through it’s whitepaper to gain a better understanding of it.