A blockchain is a decentralized, distributed ledger that records transactions in a secure and transparent manner. Cryptocurrencies like Bitcoin and Ethereum rely on blockchain technology to enable online value transfers without intermediaries like banks.
At its core, a blockchain is a public, unchangeable list of transactions that anyone can view and verify. The Bitcoin blockchain, for instance, logs every time someone sends or receives bitcoin. This technology allows payments to be made between people who may not know each other, eliminating the need for a middleman.
Beyond cryptocurrency, blockchain has uses across various sectors, including healthcare, supply chain management, and financial services, where transparency and security are essential.
Blockchains enable transactions without a middleman, which simplifies processes and reduces costs.
Bitcoin is a digital currency, while blockchain is the technology that enables it.
There are thousands, including blockchains supporting digital currencies like Bitcoin, Litecoin, and Ethereum, and many others not tied to currency.
Imagine a chain where each link contains transaction data. As you move up the chain, you encounter the latest transactions, while the oldest transactions are at the bottom. This creates a transparent, secure record of all transactions in a cryptocurrency’s history. Attempts to alter a transaction would break the link, alerting the entire network to the change.
Blockchain functions like a digital ledger but, unlike a bank ledger, it is decentralized and maintained by a peer-to-peer network rather than a central authority.
For Bitcoin, new "blocks" of transaction data are added every 10 minutes to the blockchain. Those who contribute their computing power to maintain this blockchain, known as miners, are rewarded with small amounts of digital currency.
Each user has a unique address consisting of a public and private key. Public keys are like email addresses where others can send funds, while private keys are passwords needed to spend funds.
The concept was introduced in 2008 by an individual or group using the pseudonym Satoshi Nakamoto. Blockchain technology enabled Bitcoin to operate without intermediaries, solving issues like "double-spending" by using a network that verifies transactions.
Blockchain technology has the potential to revolutionize many sectors, similar to how the internet transformed communication. Bitcoin Cash and Litecoin use blockchains similar to Bitcoin’s, while Ethereum expands on this model, allowing developers to build applications beyond currency.
Imagine a charity that distributes funds to thousands with just a few lines of code on Ethereum, or a video game developer creating items that can be traded outside the game. Blockchain is designed to enable these possibilities and much more, paving the way for a new era of decentralized applications.