Blockchain is the key principle of any cryptocurrency. Blockchains are technical and complex, and widely misunderstood. Blockchain is like an old fashioned ledger or computer spreadsheet, which records every time someone buys, sells or uses their Bitcoin. Unlike a traditional ledger which is held in one place, or a spreadsheet which is held on one computer, blockchain is maintained by a computer network all over the world. The computers, which are also sometimes called “validators” or “miners” store their own copy of the blockchain ledger, verify new entries, and keep hackers out of the system.
They key concept of blockchain and cryptocurrency is user-control and decentralisation. In traditional accounting systems with paper ledgers or spreadsheets, there’s always someone in charge. But with blockchain, every computer in the network plays an equal part. Many advocates of cryptocurrency believe this is one of its major advantages. Hackers can’t take down a blockchain or cryptocurrency in the way it could access a major bank, as there is no one target. Hackers would have to get into all of the computers in the blockchain at the same time to alter the records, which is an almost impossible task. The blockchain is also owned by all of the people who have invested in the cryptocurrency. It’s an entirely new way of operating a financial system, and the fact that it is so different is part of the reason it is so hard to understand. It’s hard to draw comparisons to the regular financial products which we are all so familiar with.
From a computing point of view, the other main aspect to a blockchain is that the coding is public, and open source. Anyone who is interested can to online, look through a blockchain’s code, and see the transactions taking place. Blockchain databases are also “add only”, meaning that once an entry is made on the blockchain, it can never be edited or deleted.
Blockchain was the invention of the mysterious Satoshi Nakamoto who we mentioned before. He, or they, wrote the code for this blockchain, and released it online for anyone to use as they pleased. Most cryptocurrencies are based on this code, although each will have adapted it to meet their own needs and those of their investors.
