So just what is a blockchain again?
Digital currencies such as Bitcoin can only thrive if enough people trust and support it to last a lifetime. The blockchain is the technological breakthrough at the heart of Bitcoin. For Bitcoin to be trusted, people have to trust the blockchain. So what is a blockchain?
The blockchain was invented as a solution to a safety issue. A system had to be established so the same person could spend no bitcoin more than once. This was the birthplace of the blockchain—a check-and-balance system to prevent double spending.
To explain the blockchain, individuals often have to swim across an ocean of jargon. However, to simplify the definition, a blockchain is a public spreadsheet or logbook of every single transaction made with Bitcoin. It is open to the public. Anyone can view it from anywhere at anytime.
The logs in the blockchain are relatively anonymous. Anyone can view how much is sent to whom, but unless you know that person’s Bitcoin ID, you won’t know whom the money was sent to or whom it was from.
An impenetrable system
After a few minutes, a new “block” of these transaction records is added into the “chain” of records. Old blocks are permanent. They cannot be edited or revised. And the whole system is held together by highly encrypted code, rendering it tamper-proof.
Thousands of specially set-up computers contain a copy of the blockchain. To tamper with one requires the gigantic feat of tampering with all the copies held in all the computers.
As an additional safety measure, all these special computers work together to comb through the system to spot inconsistencies. These machines work nonstop to look for accounts of fraud, tampering and double-spending.
The blockchain’s genius lies in its ability to promote worldwide transparency to all its users, and is impenetrably safe.
A new frontier
The next big idea for Bitcoin is creating applications for the blockchain. Factom from Austin, Texas is going to use blockchains for verifying and locking down records on mortgage contracts. This will prevent faked contracts and missing records, which have both contributed to the mortgage meltdown of the country.
Perhaps the only roadblock that the blockchain has to face involves theoretical ones set by rigorous traditional banking methods. Banks and other financial establishments make money from acting as an intermediary between consumers, from various fees to other processing costs, so it will take more time until the world embraces the blockchain in full.