What is blockchain?
For a good chunk of people (us included), math is... hard. And the “solving a math problem” analogy that keeps coming up whenever you hear about blockchain and Bitcoin is making it even harder.
So, let’s talk math. More importantly, let’s talk about the stuff behind the scenes of Bitcoin that makes the math so valuable: Blockchain Technology.
Blockchain and Bitcoin are like peanut butter and jelly. Like Snoop and Dre. Like Ren and Stimpy. You just can’t have one without the other.
Blockchain is an open ledger of Bitcoin transactions taking place all over the world. Every single transaction is public and mostly anonymous.
To get a better idea of what it looks like, imagine your bank statement: Now take away your personal information, and the information showing where the money was spent. Now combine it with every other person’s bank statements from every financial institution imaginable. Now make that public for the world to see a live feed of those transactions.
That’s kiiiiind of what blockchain is.
You’re probably thinking, “Why would I want to see everyone’s personal spending information and have them see mine?”
That’s a fair concern, but generally speaking, most people don’t have time to just look at transactions all day. With blockchain, all you can see is the amount of Bitcoin sent, the address it’s attached to, if miners have approved the transaction, and the time it was sent.
Compared to a bank statement, we get that blockchain doesn’t seem all that innovative. Before all of your credit and debit card transactions were private and secure, right? You were in control of your money before, right? Your money was unable to be spent and used without your approval, right?
The bad news is that with banks, you don’t really “own” your money. It’s not really “in” your bank account. Those are just numbers that appear to make it look like your money is there. The bank can take it away and put it back at any time, and for the most part, they do. All of the time.
What's more, is they can even put a halt on how frequently you can access it. Yes, your money is always subjected to being withheld from you; the person who earned it.
Now, as far as your “privacy” goes when all of your information is handed over to a bank, well, at this point, it’s just becoming an insult to the intelligence of the people who own and pay to use these bank accounts.
The good news is that there is a solution: Blockchain.
How does blockchain work?
Miners take a bunch of recent Bitcoin transactions and bundle them all up into one “block."
This bundling action is the "math problem” you keep hearing about, and the roll of the dice that we previously mentioned is equivalent to the guesswork that goes into trying to make all of the blocks piece together accordingly.
Imagine all the Bitcoin transactions being differently shaped Legos. Miners try different combinations of putting these pieces together until they all connect evenly and form an even, long rectangle.
Each Lego, or block, holds information about the Bitcoin transactions that have been verified by the miners. The blockchain will continue to add a Lego with a single Bitcoin’s information every time a transaction has been verified. All of its information is connected to other Legos in the blockchain.
What separates blockchain’s open ledger from combining every bank transaction in the world is this: checking the solution to the math problems is easy, meaning it’s nearly impossible to manipulate previously logged transactions. You just look the chain and see whether or not it forms an even rectangle.
For example, if you wanted to change some of the transactions and enter in different ones, you’d need to piece together the entire puzzle again, like alllllll the way back to 2009, when the first ever Bitcoin transactions were recorded.
While puzzles are being solved, the rest of the network is producing new puzzles, which means that anyone wanting to corrupt the Bitcoin network has no chance of ever catching up.
Because solving these puzzles to maintain the network is consuming of time and energy, miners who solve them are awarded Bitcoin, thus completing the mining aspect of the cryptocurrency.
So, why is this technology considered so innovative? It doesn’t stop at cryptocurrency. Blockchain is being implemented into farming, hospitals, security, nonprofits, and wherever information is logged. This means corrupting and manipulating systems that have been previously been deemed untrustworthy will have the public ledger to reclaim transparency. i.e. proof of work.
The underlying technology that makes Bitcoin and the network surrounding it so secure is referred to as blockchain. Each block holds information about Bitcoin transactions. When the puzzle connecting each block is solved, the blocks form a long, even chain securing every Bitcoin transaction ever made. To change one transaction, every single transaction before that would have to be solved again, making the network impossible to corrupt or alter, unlike the current monetary system, which can easily be manipulated by attackers and financial institutions themselves.