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August 10, 2022

What is blockchain?

What is this blockchain thing that everyone is always talking about?

Blockchain is this really complicated word that people use all the time to describe a million different things. As with all buzz words, it tends to confuse a lot of people, so we hope to clear that up here. Simply put, you can think of a blockchain as a new type of ledger. A ledger is just a way of recording transactions amongst different parties.

Well, if this is just a new type of ledger what makes it so special? Glad you asked! One of the main reasons blockchain is used for cryptocurrencies is because of the nature of how secure it is. By security here, we mean it is very difficult to hack or cheat. A special feature of most blockchains are that they are distributed. This means that there are many computers on the network, called nodes, that each carry an exact copy of the blockchain. This means that for anyone to hack or cheat the network you'd have to change the copies of the blockchain on almost all of the different nodes in the network. This is pretty infeasible. All, or most, of the nodes on the network must agree to make changes to the blockchain ledger. This means that for any new transaction that is recorded it cannot be listed as an official transaction without the community of the network agreeing that the transaction is valid. This creates a massive new layer of security and trust in the world of cryptocurrency.

Why is this so much better than other forms of ledgers and what we use today? One of the problems with digital money before the invention of blockchain was the question of how the transactions would be listed and kept secure. Money, in the digital world, is really a bunch of ledgers of who is paying who, what, and when. These transactions needed to be stored somewhere, but the problem is that before blockchain the only option was for one organization to store these transactions. This would open up that single organization to immense amounts of power. That single organization would then have the ability to double spend, cheat, steal, and lie with the funds they were keeping track of. The ledger would be private, so who would be able to stop them? Blockchain has allowed us to create a ledger that is secure and controlled by the people, not powerful corporations and individuals. At the same time, many blockchains are public which allows anyone in the public to receive absolute transparency about how the money system is working, decreasing the possibilities of corruption.

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