Blockchain Explained Simply
Admin
Nov 11, 2021
When Bitcoin was first proposed by Satoshi Nakamoto in his now famous whitepaper back in October 2008, few people could quite comprehend what was being put forward. Most of the early adopters were cryptographers and computer scientists, but it didn’t take long for the tech community to see what was happening: Considerably powerful tech was being put forward for the transformation of finance. That technology has now become known as “blockchain”.
Most people on the street understand that Bitcoin is the first decentralised cryptocurrency that runs on blockchain technology. But very few people understand that Bitcoin was the first example of that technology.
So what exactly is blockchain?
Well, blockchain is quite simply the technological infrastructure that Bitcoin (and other cryptocurrencies) runs on. Just like each software application runs on its own server, each cryptocurrency has its own blockchain.
The easiest way to understand how blockchain works is to think of a book of spreadsheets… Remember before the days of Microsoft Excel? Accountants used large, thick books known as “ledgers”, each page of those books was a separate spreadsheet. A blockchain is, in its simplest form, an encrypted book of spreadsheets.
Each block is like a new spreadsheet. And each transaction that happens in each block is recorded in that spreadsheet. After a certain amount of time, the system turns the page to a new sheet, ie. “a new block”. The reason the system “turns the page” after a certain amount of time instead of when the sheet/page is full is because the system needs to reliably expect when a new block will be created each and every time. In the case of Bitcoin, it is every ten minutes. In the case of Ethereum: 12-14 seconds. And Ripple: 3-5 seconds (each system employs its own form of the technology to fit its own set of needs and achieve its goals).
As its core, this is the very essence of what a blockchain is: A continuous ledger of spreadsheets recording transactions perpetually. But there are some significant elements that make it different to a standard Microsoft Excel or Google Sheet document…
1. This spreadsheet is distributed internationally across thousands of “nodes”
The blockchain, unlike a Google Spreadsheet or other computer server, is distributed and perfectly copied across thousands of computers all across the world. This means there is no single point of failure, and in the unlikely event of certain blocks getting compromised or hacked, the thousands of others will prove the reliability of the original record. Each node (which anyone can download and operate in order to support the network) is an exact, live copy of the entire database (ledger), so it is entirely decentralised.
2. The spreadsheet is immutable
Immutable means to be “permanent and unchangeable”. What gets entered into the blockchain, stays there. There is no backtracking or trying to hide one’s activity, once a transaction has gone through, it will live there forever. Unlike standard spreadsheets, digital or analog, where one can “back space” and delete, there is no deleting of entries on the blockchain. This makes for greater accountability in financing! Which brings us to the next point…
3. The spreadsheet is open for all to see
What is most remarkable of all is that each and every transaction on the blockchain is available for anyone to see. While there are sophisticated ways to try and uncover each transaction, some developers have made it easy by creating “block explorers” (like this one here) which makes the ability to look up a transaction, block, or wallet, as simple as child’s play! A feature designed in response to the 2008 financial crisis, the hope is that with this kind of transparency we will see less corruption and nefarious financial activity as more and more people adopt the technology.
4. The spreadsheet’s design was open-sourced
In true revolutionary style, Satoshi Nakamoto open sourced the code of the very first blockchain (Bitcoin) so that anyone can create their own cryptocurrencies, and even tweak his design - like has happened with Ethereum, Ripple and Litecoin. This technology was not corporately withheld, instead it was released to a world of passionate coders, and now we have an entire industry that has changed our world.
These are the four primary aspects about blockchain technology that make it so unique and so remarkable when compared to standard database technology. But using these examples, if you can comprehend the idea of a book of spreadsheets, you should now hopefully get the idea of blockchain. This technology truly is a formative innovation for modern society, and there is no doubt we will see more and more applications of it as companies begin to deploy it into their operations.
We at MEX-D are passionate about deploying innovative technologies, so be sure to keep an eye on our social media channels for ongoing announcements and updates.
Trading cryptocurrency carries significant risk and losses can exceed deposits. Refer to our Terms and Conditions and disclosure material. This is not financial advice
