Blockchain Basics: What is Blockchain?

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What is Blockchain?

Blockchain is a collective term for everything that happens on the “blockchain”. We can best compare the blockchain with a ledger. Ledgers are currently also (within organisations and governments) the basis on which we rely daily. These are actually not much more than files or books in which data mutations are registered. This sounds very difficult, but in fact, it is nothing more and nothing less than a file in which everything is registered. You can also see this in the way our financial systems are designed. Money, for example, is mainly to be retrieved from databases, with banks, governments, and on our own mobile phones. The only thing aspect these databases all have in common is that all ledgers are ultimately registered with some organisation. They are often not openly available, which creates the possibility for these organisations to do what they want with it.

The Blockchain is crucially different; where ledgers are normally in possession of some organisation, this is radically different with Blockchain. With Blockchain there is NO owner. It is a decentralised network where all participating people can see everything. The Blockchain technology is based on peer-to-peer exchanges. This means that a transaction (or data exchange) is transported from point A to B directly, without interference of an intermediary. For instance; if you want to effectuate a transaction from your local bank, you are first required to submit a request to transfer money. This then has to be confirmed by your own bank, after which it is sent to the recipient’s bank. When the other bank confirms it, a complete transaction is present. With Blockchain, there is no intermediary to whom an amount must be paid or who has to be waited for. If, for instance, person A carries out a transaction during the weekend, person B would normally have to wait 2-3 days. The Blockchain runs 24 hours a day and therefore ensures that delays are minimal.

For a comparison you could look at the current internet. The internet knows no owner. It is decentrally organised and everyone can use it. Everyone can build new applications on the internet without needing to comply with an entry barrier or needing permission. The advantage of decentralised applications is, for instance, that it cannot be manipulated by hackers.

Through cryptographic encryption, the Blockchain is even more secure than any other ledger currently in existence. This is because the Blockchain runs entirely on calculations. There are several computers that are performing calculations 24/7 in order to find a block. When this block (from the Blockchain) is found, all computers that were working agree with the data that is incorporated in that block. This means that person A sends a transaction of $50 to person B. As soon as the next block is found or accepted, person B will receive these $50 and the transaction has been confirmed by all computers involved in resolving the code. The major advantage of the Blockchain is that transactions are encrypted and cannot be altered afterwards. Once a transaction has been confirmed by everyone, nothing can be changed about this anymore, with the exception of, for instance, carrying out a new transaction.

For the Blockchain this means that you cannot commit fraud with your balance. The only way to change your balance is to effectuate a transaction. Effectively, this means a new entry is added to the Blockchain. The condition related to this is that only Bitcoins from an older entry can be transferred. Thousands of copies that exist around the entire world are compared to ensure that these transactions are authentic. This creates the possibility to make information and transactions impossible to counterfeit.

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