There is much discussion about the currency of the future and whether bitcoin, ethereal and other cryptocurrencies will last. A form of all of them is here to stay. It’s important that you understand this technology so that you can capitalize when opportunities come around.
Blockchain is the technology that powers bitcoin. In very simple terms, it is a long spreadsheet of transactions that is kept and updated by everyone participating in the network.
Blockchain is a publicly distributed ledger where transactions are recorded and verified anonymously. It is a shared record of events that have occurred between different parties. These records cannot be altered once entered on the public ledger.
Today’s systems are centralized in the sense that a company, government or institution has a database that people trust to record, store, secure and maintain the integrity of their information.
Blockchain however, decentralizes the process, eliminates the middle men and allows for digitized, peer to peer exchanges that are secure and public.
Records entered on the blockchain are first verified and then stored in a distributed network of computers worldwide. There is no need for a third party or central entity to trust. All of the information is public and developed as open source software. That means there is no single company that powers or owns the software. It’s shared freely and transparently. This is what makes the process decentralized.
How does this work?
When you send bitcoin to a friend you are creating and publishing a record onto the blockchain. The bitcoin network will make sure you have not sent this bitcoin to someone else. Once verified it will transfer bitcoin from your account to your friend’s account. Your block of information, which contains the transaction, is then hashed by a computer algorithm.
Each digital block of information is chained chronologically as new transactions are formed. That chain creates a code or hash in between each block. Ultimately, this series of actions is what creates what we call the “blockchain.”
If someone wanted to go back and alter a block of information on the chain they would need to alter all previous blocks. This is computationally very difficult to do. This is what makes the blockchain so unique and powerful.