What Is the Blockchain?
“Blockchain is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one.”
— Sally Davies, FT Technology Reporter
Blockchain is the brainchild of the person or group of people who go by the pseudonym, Satoshi Nakamoto. The paper outlining the design for a globally distributed ledger network to run a trustless, peer-to-peer electronic cash called “Bitcoin” appeared on a forum in 2008, and then exploded into the multibillion-dollar industry it is today.
A blockchain is so revolutionary because it is a decentralized, distributed ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and transparently. The blockchain continuously updates ownership and transmits that information to all participants in the blockchain called nodes. The blockchain is the driving force of what makes Bitcoin and other cryptocurrencies so revolutionary.
How does the Blockchain operate?
The Blockchain is built off of what is called Distributed Ledger Technology or DLT. It is called such because when a change in the blockchain occurs, it is distributed to the network of replicated databases that are all connected to each other through the internet. So, when a Bitcoin transaction is made, that information regarding the transfer of ownership is transmitted to all nodes on the synchronized system.
Because the blockchain is continuously updated, there is public proof of ownership at all times. Not only that, but the history of each bitcoin or whichever token you are tracking can be traced back to when it was first mined or issued, making fraud almost impossible. When a transaction occurs, it is grouped together with other transactions into a “block”. This group of transactions is then validated through a complex mathematical problem-solving process known as “mining”. The entities that perform the validation of these grouped transactions are called miners.
Anyone who runs the Bitcoin Core protocol contributes their computer power to the Blockchain and is in a race of sorts with other miners for who can find the mathematical solution first. Think of miners as your bank, ensuring the validity of a check you have written. For more information about mining, check out our Basics of Mining section for a full explanation of the process.
In that scenario, however, you have a central authority doing the validation. The blockchain removes the need for a central authority and puts the control firmly in the hands of the two people or parties involved in the transaction. The validated transactions that have now been grouped together in a block, are then chronologically ordered with other blocks in a chain, each permanently time stamped. Since the blockchain lives in a cycle of being rechecked and updated every ten minutes on every node connected to the network, it makes it all but impossible to corrupt the information stored on it. This creates complete transparency and a self-auditing system that requires no oversight since that oversight is derived from the programming itself.
Implications of Blockchain Technology
The way the World Wide Web changed the way we think about almost every aspect of everyday life, the blockchain has the potential to ignite another technological Renaissance. Nearly every industry in the 21st century requires some form of networked system to operate daily functions and store data efficiently and securely. Centralized networks have proven to be extremely vulnerable to hacking, infiltration, data manipulation, and theft. Since all data is distributed across the network in a blockchain, it makes it impossible for a hacker to manipulate data without it affecting the entire network and alerting other nodes to its presence and modifying the network connections accordingly to bypass the breached node.
We have already seen many industries adopt blockchain technology to solve issues with logistics, record-keeping errors, and lengthy transaction processing times. From shipping services and online retail to healthcare and even voting systems, blockchain applications are spreading into every facet of everyday life.
To follow updates on the development of this technology and the market, check out our Blockchain News section.