What Exactly is a Blockchain? How Does the Blockchain work?
What is blockchain?
At its most basic, a blockchain is a list of transactions that anyone can view and verify. For example, the Bitcoin blockchain contains a record of every time someone sends or receives a bitcoin. Cryptocurrencies and the blockchain technology that powers them make it possible to transfer value online without middlemen like banks or credit card companies.
Imagine a global open alternative to every financial service you use today, accessible with nothing more than a smartphone and an internet connection. Almost all cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash, and Litecoin, are secured through blockchain networks. This means that their accuracy is constantly verified by vast amounts of computing power.
The list of transactions contained in the blockchain is the basis of most cryptocurrencies because it enables secure payments between people who don't know each other without going through third-party validators such as banks.
Due to the encrypted nature of these networks, payments made via blockchain may be more secure than standard debit/credit card transactions. For example, you do not need to provide any sensitive information when making a Bitcoin payment. This means there is virtually zero risk of your financial information being compromised or your identity stolen. Due to the encrypted nature of these networks, payments made via blockchain may be more secure than standard debit/credit card transactions.
How does the blockchain work?
Imagine a chain that you might use as an anchor for a boat. But in this case, each link on the chain is a block of information that contains transaction data. At the top of the chain, you'll see what happened today, and as you move down the chain, you'll see older and older transactions. If you follow it all the way to the anchor at the bottom of the port? You will see every transaction in the history of that cryptocurrency. This gives the blockchain a strong security advantage: it is an open, transparent record of the entire history of a cryptocurrency. If someone tries to manipulate a transaction, it causes the link to go down and the entire network sees what happened. In a nutshell, this is blockchain explained.
Another way people often describe a blockchain is that it's a ledger (sometimes you'll hear the terms "distributed ledger" or "immutable ledger"), similar to a bank's balance sheet. Like a bank's ledger, the blockchain tracks all money flowing into, out of, and through the network.
But unlike bank ledgers, encrypted blockchains are not maintained by any individual or organization, including banks and governments. In fact, it's not centralized at all. Instead, it is secured by a large network of peer-to-peer computers running open-source software.
Where do new cryptocurrencies come from?
Every so often, in Bitcoin 's case , roughly every ten minutes, a new block of transaction information (or a new block) is added to the existing chain of information. In exchange for their contribution of computing power to maintain the blockchain, the network rewards participants with small amounts of digital currency.
The encrypted blockchain is distributed throughout the network of digital currencies. No company, country or third party can control it; anyone can participate.