Blockchain is an encryption technology. It was developed in 1992 with online shopping in mind. The creators wanted to timestamp transactions in a way that made them impervious to fraud.
Traditionally, we manage transactions through a centralised ledger. Generally, this is through banks, who hold their own ledgers. When we buy something, the merchant sends a message to the bank that we’ve performed that transaction. The bank adds that information to the ledger and tallies up our account balance.
The same happens when we send money to other bank accounts. It goes through a clearing process, there are checks and balances, and we pay the bank for the privilege of making sure all our bucks are accounted for.
#A blockchain means you don’t need a bank to verify a transaction took place.
Instead, each participant has a unique identifier that can’t be stolen or hacked easily (unlike credit cards, for example). When the transaction occurs, it isn’t monitored by a third party - it’s recorded by everyone using the system, in a distributed ledger.
If you try to change your copy of that distributed ledger, it won’t match all the other copies and a red flag goes up. In this way, it prevents fraud, which is why blockchains are lovingly nicknamed trust machines.
For those interested in the tech, the blockchain has two parts: the block, and the chain.
Each block encodes information about a group of transactions. When the block reaches its number-of-transactions capacity, a new block is created and linked to the previous block. That link is the chain bit.
A blockchain can be used to record transactions wherever you have them - signing legal contracts, for example. Using this tech means you don’t need third parties to manage the process. You also don’t need to audit the events to prove they happened; the blockchain does this inherently. So, it saves time and cost associated with those activities.
It can also be used for financial transactions.
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