Blockchain technology is the most important thing happening in the world today. It will change everything.
This article isn’t going to try to explain blockchain technology. Blockchains are complicated, and it’s hard to know where to begin. Some of the best things I’ve read about them, and some of the best things I’ve ever written, start with a definition like this: “A blockchain is a shared database that everyone has access to, but no one owns.”
The point is that you need to know what a blockchain is before you can understand how they work. Even if you don’t care how they work, you should still know what they are. And you should be able to talk about them.
A blockchain is a chain of blocks. The details of the chain depend on what kind of blockchain it is. For example, Bitcoin has a chain in which each block (or more precisely, each group of transactions) is linked to the previous one by cryptographic link. If you look at the first few blocks of a Bitcoin block chain, you will see the same transaction repeated many times:
This means that in each block there are multiple records and multiple pointers to other records. In this case the pointer points to previous transaction records, but it can point to any kind of record: contract, token, whatever.
Here’s how to understand why this works. A blockchain is like a ledger: an account book with columns for named entries and rows for numbered records. Each column can have any number of different entries, but each entry has exactly one name and one number. Here’s an example from Wikipedia:
* * * * * * * *| | | | | | | |->|<-|->|<-| |->|<-|->|<-____ \ / \ / \ / \ / \/ ->->->->->\___/ ->->\___/” />/>\
This could be the record for “two bananas”
Bitcoin’s technology has been described as “an open, distributed ledger” that “underpins a new type of money.” But what does it mean to say that something is an open, distributed ledger? The most important thing about a ledger is that you can see all of the transactions that have ever happened on it. I could make a list of every dollar I’ve ever spent, but if I can’t see how those dollars were originally acquired, my list won’t be much good.
But the blockchain wasn’t designed to be a ledger; the blockchain was designed to be something else. It was designed to be a database. But if you want to talk about databases, you need some other word besides “ledger.”
The most common term for the things we are calling databases these days is “blockchain.” And while some people like this name because it suggests they’re using technology from the future, in fact it’s just another way of talking about databases.
Blockchains are a way of making sure that everyone has a full record of something. As opposed to a book-keeping system, where you have to trust one person not to cheat, or keep everything in your own head, with a blockchain, everyone can check the same thing and know for sure that it’s right.
Blockchain is just a case where computers record information all at once. The information can be anything: the order of items in a database; the number of seconds since someone was born; the list of people who hold Bitcoin.
If everybody has the same information, it’s easy to check if it’s correct. If you’re keeping a list of people who have keys, you don’t need any special software. Just take the list from your computer and compare it with what your friends have on theirs.
A blockchain is a public ledger of all Bitcoin transactions that have ever been made. It is essentially a list of every transaction ever processed, which can be verified and edited by anyone with an Internet connection. A blockchain keeps everyone honest: if you try to spend the same money twice, it will flag your attempt and alert you or the authorities.
Unlike banks, where there are a few people in charge, with all the power concentrated in those few hands, with Bitcoin everyone has a say.**
It’s not like this book is going to teach you how to program: it’s more like instruction manual for Bitcoin than a textbook on programming.
But it’s still worth knowing about Bitcoin; because if we make it easier for ordinary people to use Bitcoin, then more ordinary people will use it. And that means the network becomes stronger and more resilient.
A blockchain is a ledger of transactions. It’s kind of like a spreadsheet that can be copied and shared. If Alice wants to send Bob some bitcoins, she makes a note of the transaction on her copy of the spreadsheet. Then Alice sends her copy to Bob. The other copies are left unchanged; they are still part of the original shared ledger.
Once all the copies have been sent, they cannot be changed without everyone agreeing to change them at once. It is as if you were keeping a running list of everyone who owes you money, and if one person tried to change their debt, you would all have to agree too.
The ledger is public by design. If Alice and Bob both want to send bitcoins to each other, they can do it anonymously, because no one knows who they really are. That means they can trust that the ledger won’t be changed against them (if anyone tried to cheat them). Also, when Alice wants to send bitcoin to someone else, she can just add their transaction on her copy of the spreadsheet with no need for them to know where she got the bitcoins from or how much she sent.
The biggest change to the Internet in a decade is happening right now, and it has nothing to do with the Web: it’s a technology called blockchain. Blockchain is a kind of database that is much more secure than any database you’ve used before. It is a disruptive technology because it can be used for applications that have never been possible before.
Blockchain can increase the privacy and security of transactions. It can decrease the cost of digital transactions by making them more secure and efficient. It can serve as a distributed ledger for business transactions and record keeping. And it can be used for digital currency like Bitcoin or Ethereum.