A SHORT Introduction To Blockchain For Normal People

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If you've attemptedto dive into this mysterious thing called blockchain, you would be forgiven for recoiling in horror at the sheer opaqueness of the technical jargon that is often used to frame it. So before we enter just what a crytpocurrency is and how blockchain technology might change the planet, let's discuss what blockchain happens to be.

In the easiest terms, a blockchain is really a digital ledger of transactions, not unlike the ledgers we've been using since way back when to record sales and purchases. The function of the digital ledger is, actually, pretty much identical to a normal ledger in that it records debits and credits between people. This is the core concept behind blockchain; the difference is who holds the ledger and who verifies the transactions.

With traditional transactions, a payment in one person to another involves some type of intermediary to facilitate the transaction. Suppose Rob wants to transfer �20 to Melanie. He can either give her cash in the form of a �20 note, or he is able to use some type of banking app to transfer the money directly to her bank account. In both cases, a bank is the intermediary verifying the transaction: Rob's funds are verified when he takes the amount of money out of a cash machine, or they're verified by the app when he makes the digital transfer. The bank decides if the transaction should go ahead. The bank also holds the record of most transactions made by Rob, and is solely responsible for updating it whenever Rob pays someone or receives money into his account. Put simply, the bank holds and controls the ledger, and everything flows through the bank.

That's a lot of responsibility, so it is important that Rob feels he is able to trust his bank otherwise he would not risk his money with them. He needs to feel confident that the lender will not defraud him, will not lose his money, will never be robbed, and can not disappear overnight. This need for trust has underpinned almost every major behaviour and element of the monolithic finance industry, to the extent that even when it was found that banks were being irresponsible with our money during the financial crisis of 2008, the government (another intermediary) thought we would bail them out rather than risk destroying the ultimate fragments of trust by letting them collapse.

Blockchains operate differently in one key respect: they're entirely decentralised. There is absolutely no central clearing house just like a bank, and there is absolutely no central ledger held by one entity. Instead, the ledger is distributed across a vast network of computers, called nodes, all of which holds a copy of the complete ledger on their respective hard disks. These nodes are connected to one another via a software application called a peer-to-peer (P2P) client, which synchronises data across the network of nodes and makes sure that everybody has the same version of the ledger at any given point in time.

When a new transaction is entered right into a blockchain, it really is first encrypted using state-of-the-art cryptographic technology. Once encrypted, the transaction is changed into something called a block, which is basically the term used for an encrypted band of new transactions. That block is then sent (or broadcast) in to the network of computer nodes, where it really is verified by the nodes and, once verified, offered through the network so that the block can be put into the finish of the ledger on everybody's computer, under the list of all previous blocks. That is called the chain, hence the tech is referred to as a blockchai Hong Kong Blockchain