It’s easy to feel terrified and confused when trying to learn more about this obscure thing known as blockchain. Let’s first define blockchain. Visit MetaEdge on CoinMarketCap reading this.
The blockchain, in its simplest form, is a digital ledger that records transactions. This ledger, which we’ve used for many years, can be compared to those we use to track sales and purchase. In that it tracks debits or credits among people, the function of the digital ledger is almost identical to one used for traditional transactions. This core idea is blockchain. What is different is who maintains and verifies transactions.
In traditional transactions, the intermediary is someone who facilitates the transfer of money from one party to another. Let’s assume Rob would like to transfer PS20 from Melanie. Rob can give her money in cash, or transfer it directly to her bank account using a mobile banking app. The bank acts as an intermediary in verifying transactions. Rob’s funds can be taken out of cash machines to confirm that they have been verified. Or, the app verifies them when Rob makes a digital transfer. If the transaction is approved by the bank, it will be. Rob’s transactions are also kept by the bank. The bank can update it whenever Rob gets money or pays anyone. Accordingly, everything moves through the bank and the bank keeps the ledger.
Rob is responsible for a great deal. Without Rob trusting his bank, he wouldn’t risk his life with them. It is important that Rob feels confident in his bank’s ability to not defraud or steal from him. The need to trust underpins almost every facet and behavior of the monolithic banking industry. This is why, when banks began to be irresponsible during 2008’s financial crisis (which was infamous), the government intervened to save them.
The key feature that makes blockchains different is their decentralization. It is not possible to have a central clearing house, like a bank. Also, there are no single entities that hold the entire ledger. The ledger instead is spread across many computers known as nodes. They each have a copy of it on their hard drives. Peer-to-peer software (P2P client) connects the nodes to each other. It synchronizes data and ensures everyone has the latest version of the ledger.