With the rise to prominence of cyptocurrencies like bitcoin, especially over the past year, chances are that you’ve at least heard of the blockchain. Ask anyone in the know about bitcoin and the term “blockchain” will most likely come up in the conversation. And as this blog post will explain, that’s for good reason.
In short, the blockchain is the technological backbone that allows all transactions involving cryptocurrencies to happen. The first major application of blockchain technology was with the introduction of bitcoin in 2009. As previously mentioned, bitcoin is a “cryptocurrency”, which is a coin that is completely digital and operates through encrypted technology. Bitcoin was created by someone who went by the name Satoshi Nakamoto. The true identity of Satoshi Nakamoto isn’t known, and some people even believe that it is actually the alias for a group of people. But whatever the case, Nakamoto laid out the blueprint for bitcoin in a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”.
The blockchain itself acts as a public ledger of every transaction that takes place using bitcoin. Each recorded transaction is encrypted, therefore blockchain technology is said to be secure from tampering. Supposedly no one can go in and retroactively change any transactions
Another thing that makes the blockchain special is that it is decentralized. While most traditional currencies are controlled and issued by a central bank or other central authority, the bitcoin blockchain is instead maintained by a network of individuals known as bitcoin “miners”. To keep it simple, miners are people that run specialized computers that solve complex mathematical problems to allow transactions to go through.
Every individual involved in a transaction has their own unique bitcoin “wallet” with its own unique wallet ID number. This ID number provides the proof that a transaction came from that particular wallet owner. Individual transactions get grouped together into cryptographically-organized blocks. Those blocks then get sent out to the bitcoin network, made up of individual miners. Those miners then use high-powered computers to compete to validate the transactions. Transactions are validated by solving the aforementioned mathematical problems.
Miners are rewarded for their efforts by receiving bitcoin themselves, and the validated block of transactions gets added onto previous blocks, creating the chain of blocks we know as “the blockchain”. It can be a complicated process, but those are the basics of what is the blockchain. There are other blockchains besides the one for bitcoin, but they all operate under pretty much the same principles.