What is blockchain?
A blockchain is a kind of digitally distributed ‘spreadsheet’ that keeps track of any data loaded and locked into it. Its use can range from recording and keeping track of financial transactions of any kind, to sales, or even keeping track of an electoral vote. Its strengths as a technology include its immutability, meaning that any information loaded into the blockchain can’t be tampered with, its security, and transparency.
In the crypto world, blockchain serves as the backbone of a cryptocurrency network on which all transactions ever made with a cryptocurrency are recorded. Cryptocurrency ‘coins’ have their own native blockchain like Bitcoin. Tokens are digital assets that are built on top of another blockchain (ERC-20 for example). For example, the Bitcoin blockchain is the ledger, or the spreadsheet, on which all the transactions that have ever been made with Bitcoin are recorded.
Is there an example?
The best example is blockchain’s first and still most famous application: Bitcoin.
The Bitcoin ledger is distributed across the entire network. Everyone in the network can see it and trust that what is on it is correct. That transaction is recorded in the Bitcoin blockchain ledger and sent across the whole Bitcoin network for everyone to see.
The updated ledger is copied hundreds of thousands of times, every single hour, across multiple computers to make sure that everyone is on the exact same page. They will then verify that the transaction has really taken place and there is nothing amiss. If at least 51% confirm that it has taken place, it will be added permanently to the blockchain.
Because that blockchain has to be double and triple and quadruple checked by computers all around the world, you can actually set your own computer to become part of the network and help both verify transactions and also help mine Bitcoin.
People aren’t just using blockchain for cryptocurrency, though. You can theoretically store any data on a blockchain and companies across a variety of industries are using it for different tasks, such as keeping track of goods through the supply chain.