Cryptocurrency ABCs: Blockchain
Entering the world of cryptocurrency for the first time can be difficult. Learning all the terminology can be confusing and it is easy to feel overwhelmed. In this series, Cryptocurrency ABCs, we are going to cover important cryptocurrency terms and concepts from A-Z! Each post will cover a topic based off a letter in the alphabet.
Let’s cover the letter B!
Blockchain is the technology that makes Bitcoin and cryptocurrency possible, but what is it?
A blockchain is a decentralized, public ledger that records all cryptocurrency transactions. This ledger is constantly growing, as transactions are added and processed in “blocks”. Each computer (node) linked to the network holds a copy of the ledger. This removes the need for a central authority to maintain records.
The term “blockchain” comes from the mechanics of the network. Transactions are recorded to “blocks”, that are then processed and confirmed by miners on the network. When the block is processed, it becomes a permanent part of the database.
A new block is then created and these blocks are linked together like a chain, hence the term “blockchain”. Blocks are connected together in chronological order with each block containing a hash of a previous block, helping to ensure the incorruptible nature of the ledger.
The cryptocurrency blockchain is a decentralized ledger but it is also public. Anyone can view the transactions on the blockchain. These transactions only appear as wallet addresses and there is no personal identifiable information stored on the Bitcoin blockchain.
This is how the Bitcoin network functions but some blockchains are slightly different and they do not have to be limited to cryptocurrency. The incorruptible and transparent nature of the blockchain makes it ideal for a number of applications.
Cryptocurrency Blockchain Beyond Bitcoin
Bitcoin was the first use case for blockchain but the world is starting to realize that blockchain can be used for much more than cryptocurrency.
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
Don & Alex Tapscott, authors Blockchain Revolution (2016) Currently there are projects to put just about everything on the blockchain. There are companies that want to store records for healthcare, land ownership and even supply chain data for diamonds. Blockchain ensures that these records will never be tampered with or destroyed.
The future of blockchain will focus less on cryptocurrency and more on the development of cryptocurrency blockchain based businesses. Nearly every industry and institution will at some point be affected by the blockchain revolution.
Right now, there are many companies who are investing heavily in cryptocurrency blockchain. Microsoft, IBM and J.P. Morgan are all experimenting with distributed ledger technology. The Enterprise Ethereum Alliance, which promotes the Ethereum platform, boasts an impressive list of Fortune 500 companies. Business leaders are finally beginning to understand the massive untapped potential of the cryptocurrency blockchain.
Blockchain is a technology that will define an entire generation, much like the development of the internet. Here are a few important things to remember.
- Blockchain is a decentralized, public ledger
- Information stored on the blockchain is transparent and cannot be tampered with
- Blockchain can be used for much more than cryptocurrency
- The first use of blockchain was with Bitcoin
- There is NOT one blockchain. When companies say they are building on the blockchain they are not talking about the Bitcoin blockchain, no one is building on that blockchain. Many projects implement their own blockchain or build on a blockchain like Ethereum.
Stay tuned for Cryptocurrency ABCs: The letter C!
You can read Cryptocurrency Anonymity here.