A SHORT Introduction To Blockchain For Normal People
If you've attempted to dive into this mysterious thing called blockchain, you'd be forgiven for recoiling in horror at the sheer opaqueness of the technical jargon that's often used to frame it. So before we get into just what a crytpocurrency is and how blockchain technology might change the world, let's discuss what blockchain actually is.
In the simplest terms, a blockchain is really a digital ledger of transactions, not unlike the ledgers we have been using for hundreds of years to record sales and purchases. The function of this digital ledger is, actually, pretty much identical to a normal ledger for the reason 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 really wants to transfer ï¿½20 to Melanie. He can either give her cash in the form of a ï¿½20 note, or he is able to use some kind of banking app to transfer the amount of money directly to her bank-account. In both cases, a bank may be the intermediary verifying the transaction: Rob's funds are verified when he takes the 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 lender 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. mobile blockchain app Quite simply, the lender holds and controls the ledger, and everything flows through the bank.
That's a large amount of responsibility, so it's important that Rob feels he can trust his bank otherwise he would not risk his money using them. He must feel confident that the bank will not defraud him, will not lose his money, will never be robbed, and will not disappear overnight. This need for trust has underpinned pretty much every major behaviour and element of the monolithic finance industry, to the extent that even though it was found that banks were being irresponsible with this 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 a single key respect: they're entirely decentralised. There is no central clearing house like a bank, and there is absolutely no central ledger held by one entity. Instead, the ledger is distributed across a massive network of computers, called nodes, each of which holds a copy of the entire ledger on their respective hard drives. 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 certain that everybody has the same version of the ledger at any given time.
When a new transaction is entered into a blockchain, it is first encrypted using state-of-the-art cryptographic technology. Once encrypted, the transaction is changed into something called a block, that is basically the term used for an encrypted group of new transactions. That block is then sent (or broadcast) into the network of computer nodes, where it is verified by the nodes and, once verified, offered through the network so the block can be added to the end of the ledger on everybody's computer, beneath the list of all previous blocks. That is called the chain, hence the tech is known as a blockchai