Blockchain Basics
Blockchain can seem complicated, and it can be, but its core concept is actually quite simple. This article will help you understand the overall idea of blockchain technology and picture it in an easy way.
What is Blockchain?
A blockchain is just a database.
By using math and cryptography, blockchain provides a public and decentralized database of any transaction involving value (e.g. money, goods, property, work or votes), and records information in an immutable and anonymous way:
- Anyone with access to the Internet can get involved in blockchain based transactions, making trusted third-parties unnecessary.
- Rather than being maintained in one location, many identical copies of a blockchain database are held on multiple computers spread out across a network. This makes it exceedingly difficult to change or cheat the system and creates a record whose authenticity can be always verified by the entire community.
- As a public record, blockchain provides transparency of all the transactions and makes them traceable.
How Blockchain Works
The name blockchain comes from the fact that each new entry in the database (called a block) contains a record of past transactions. Each entry points back to the previous one, thus creating a chain of blocks.
The way these new blocks are created is key to why blockchain is considered highly secure. First, blockchains are append-only. That means you can only add new information in the form of additional blocks, which will then be chained together to previous blocks of data. Existing data is thus immutable.
Second, before a new block can be added to the database, a majority of computers spread out across a network must verify and confirm the legitimacy of the new data. Once there is consensus between the validators, the block is added to the chain and their efforts are typically rewarded in the blockchain’s native currency.
How Sending Crypto on a Blockchain Looks Like
Here is how sending cryptocurrency on a blockchain works in practice, securely, anonymously, and without the need for trusted intermediaries:
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