What is Blockchain?
Blockchain is simply a list of secure transactions that anyone can see and acknowledge without the transaction being hacked or altered. It is known by many as a “digital ledger” as it records information for every purchase, deal, vote, etc. It allows individuals to deal directly with one another without the involvement of a “middle man” like banks, governments, and other third parties like betting websites, social media sites, & real estate companies who are all responsible for taking cuts out of every deal.
What kind of information does blockchain record?
Great question! Blockchain can be used to record information like buying & selling art, tracking anti-money laundering, music ownership tracking, sharing of medical data, supply-chain monitoring, voting, charity distribution tracking, crowdfunding, money transferring, and so much more! It is important to note that although blockchain has been around for a while we, as a society, have only recently adopted this technology, so there are still more solutions to come for the many problems out there, through blockchain!
How does Blockchain work?
Before we answer this question, it is important to note that there are many blockchain networks out there. All of these blockchain networks work in different forms as their function depends on what problem they are solving. Stellar for example, which is quite a popular blockchain network, uses its blockchain to solve money-moving problems for businesses, banks, & people, all around the world.
With that being said, we will use Bitcoin’s blockchain system as an example to explain how blockchain works, for Bitcoin.
- When you purchase a Bitcoin, it is entered and transferred to a network of computers, called Nodes. There are thousands of nodes in the Bitcoin network.
- These Nodes then confirm or deny your purchased Bitcoin transaction through algorithms based on your private key information! Think of nodes as health inspectors, for example. They visit locations like restaurants to investigate potential health hazards in order to keep the public safe. Similarly, Nodes verify every Bitcoin transaction in the world in order to make sure they’re accurate.
- After confirmation, your bitcoin sale is added to a block on the “digital ledger.” In regards to the example, it means that the health inspector went back to his office and wrote his approval of the restaurant saying, “Yes, I have verified that ABC’s restaurant is authentic and follows the rules!” Just like that, the nodes take the block with your verified transaction in it, and post it on the digital ledger stating, “Yes, ABC has bought 1 Bitcoin and we approve this transaction!”
- The Block is then chained to previous blocks that consist of previous bitcoin transitions. Your sale is officially processed!
Disclaimer: The information and content manifested on the Black Swan Bitcoin blog are for educational purposes only. Nothing published by Black Swan Bitcoin constitutes as investment recommendation, nor should any data or content published by Black Swan Bitcoin be relied upon for any investment activities.