A blockchain is a public ledger, shared across a network of computers. The ledger has a record of every transaction that has ever occurred on the blockchain and whenever a new one occurs in the world, it’s added to a pool of other new transactions. At an equal interval the pool is gathered up, converted into a block and added to the chain. Additions to the blockchain are impossible to fake but easy to verify.
How does a blockchain work?
A blockchain is a digital record of information. This information could be anything from monetary transactions to passport details.
Traditionally, valuable information like this would be stored in one place, by a bank or government. For example, a bank keeps a list of every transaction that’s made with its customers’ money, so it can accurately keep track of how much money each customer has.
Instead of keeping this information in one place (like a bank), blockchain technology stores this information on thousands of computers. Each computer has a copy of the blockchain – a list of every transaction ever made in exact time and date order. Once a transaction is added to the blockchain it can’t be edited or deleted.
Instead of having to pay a third party like a bank or land registry to transfer assets from one person to another, the blockchain allows this to happen securely by sending a record of the transaction to every computer in the network.
If anyone tried to change a copy of the blockchain without permission, all the other computers in the network would know and the change could not be made.
Here’s an example:
Person A wants to send person B some money. The blockchain contains a record of how much money both Person A and Person B have. All the computers in the network check whether Person A has enough money to pay Person B. They do this by examining their copy of the blockchain (a record of all previous transactions). If they come to an agreement and confirm that Person A has sufficient funds, the transaction is recorded and given a timestamp.
If someone tried to pay for something without the required funds, the network would reject the transaction.
How secure is blockchain?
In a traditional network where information is only stored in one place, fraud or hacking is simple. But when records are duplicated on thousands of computers at once, the network easily detects a change made on one computer. The changed record no longer matches the records held by the other machines and the fraud is detected.
To hack a blockchain you would need to simultaneously change the records on every computer in the network at exactly the same time. The computing power to perform a task of this scale renders it impossible.
Is there more than one blockchain?
Yes, different blockchains hold records of different types of information.
How does blockchain affect me?
In the future, the transfer of any secure digital information will be handled instantly without the need of a third party, saving huge fees and time.
Blockchain technology already powers hundreds of digital currencies like Bitcoin and DasCoin but it can be used to store any valuable information that needs protection from hacking or fraud.