What's that about?
There’s a lot of interest in blockchains and Bitcoin but what exactly is all the fuss about and is it really the new Big Thing in tech?
First things first:
Bitcoin is not Blockchain (and vice versa). Both appear together a lot in talks and various papers but fundamentally they are two separate things:
- Blockchain is the transaction ledger; Bitcoin is a digital currency example using the Blockchain
- Bitcoin is in fact the first implementation of a concept called "cryptocurrency" and,
- was the basis of a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” written to solve the double-spend problem of digital cash.
So what is a Blockchain?
- It is an open ledger of blocks of digital transactions - a chain of data blocks.
- Every transaction is validated by Miners and appended to the Blockchain
- Miners are computers tasked to authorise a transaction; the first Miner to solve a mathematical puzzle gets a fee and locks the transaction in the blockchain.
- The blockchain is a Distributed Ledger; it is synchronised across many computers and is not held centrally
- A huge benefit for the future is in the transfer of digital assets without the usual cost incurred by a third party
- Digital assets (not just currency) but contracts, pdfs, music etc
- Auditable because each block is date/time stamped and has to reference the preceding block.
A blockchain is a distributed database of blocks of transactions that have been verified and added to the chain of blocks
The technology places trust and authority in a decentralised network rather than in a powerful central institution: With blockchain, transactions become decentralised and distributed, cutting out the middleman (Centralised-financial institutions in the case of currency) and becoming self governing through peer-to-peer distributed computers.
Immutable - the blockchain cannot be hacked/changed. When a Miner solves the computational puzzle it publishes the latest block to the blockchain and all the other computers synchronise the blockchain db. Blocks tend to be appended at ten minute intervals. An attack on the blockchain to change a previous transaction would require massive computational energy carried out in a ten minute window and then to synchronise and update all peer-to-peer blockchain dbs - realistically, an impossible feat.