When you just entered Crypto it might be hard to wrap your mind around this concept and what it is used for. With this article I try my best to explain what a Blockchain is, what it is used for and why it is so revolutionary.
What is a Blockchain?
Actually the name describes it pretty much. It is a chain of blocks. But that still deosn‘t help you, does it? The definition of Wikipedia says “A blockchain, originally block chain, is a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a merkle tree root hash)“.
In simple English, it is a database. A decentralized one to be specific. That holds record of all transactions done in the network. This database consists of blocks. These blocks are linked together in a certain order through cryptography and contain for example transactional informations (I will get to more use cases later on), which also need to be verified. This job is done by so called „miners“. They give their computational power to the network to verify a block of transactions and in return they get some kind of reward. Most of the times, if not always, it is the coin of that blockchain they are expanding. For example, if I mine a block for the Bitcoin blockchain, I will get paid in Bitcoin.
After this process the block is verified, and with it all transactions written down in it. These transactions can‘t be changed since the database on every computer is always the same. Everyone has the same version of the truth. And this makes it absolute within the network. This means no one can do mischief by changing their own version of truth, because every other node (e.g. computer) has the “majority” version, which matches the truths of others.
To sum it up. A blockchain is a distributed database, which allows you to have a record of all transactions ever done in a network.
A blockchain (network) is a software architecture that allows to make secure transactions between unknown or untrusted counterparts through a network that shares and distributes these transactions in a peer-2-peer fashion. The network reaches a consensus on the validity and the order of those transactions by verifying defined and shared rules and by joining them in blocks with a cryptographic reference to the previous block.
What can it be used for?
Well the use case a blockchain is most known for is creating a currency. Every transaction and every account is written in there. So everyone knows for sure what to expect from the other. If you want to compare it to the traditional banking system you can say that your public key, is your IBAN. Everyone knows it and everyone can send funds to this address. But what gives you access to these funds? Your PIN. And this is your private key. Whoever holds the private key holds the funds. That’s why D Man told many times, that you shouldn’t keep your funds on exchanges. You don’t own this money, they do.
There is another very good use case. It is connected to the internet of things. That is the transparency of production chains. Just say you have a jacket. At first it will get a unique code. The jacket itself doesn’t exist yet but the code does. So everytime this code gets scanned in a new production step, it will be written down in a block. From the raw materials to the cheap chinese work everything is written on the blockchain. And at the end of the production cycle there comes a nice jacket, you can use to seduce your Natasha. This way you could also differ the clothes of a known brand from the faked ones.
You could also make a simple game with it. Some of you may know the game CryptoKitties. It is a game where you can breed and trade digital cats. These are collectibles whose ownership and breeding is tracked on the Ethereum blockchain.
Since the blockchain is still very young not many use cases were found. I expect there are many more to come, we didn’t even think about. But I think these two - currency and production cycles - are very strong ones.
What makes it revolutionary?
We already have currencies, production cycles, games, etc. So why do we need something so complicated as the blockchain with its cryptography and shit? The answer might sound a little odd. You don’t have to trust anymore.
What happens when you lose your PIN of your banking account? You call your bank and they basically give you a new one. What do you do if you want to send funds to somebody? You give an order to your bank. What if you unexpectedly made a whole lot of money? Your bank freezes your account and demands to know where this money comes from. You are not in control of your own money. And this is changed with the blockchain. Every good thing that happens to you is selfmade from you. Every mistake you do is your own. You can finally be yourself. As D Man told us many times, you are FREE!
If you are still trying to grasp the concept...
Here is the most simple way to describe it or should I say sketch it...
I wrote this, not only to explain what a blockchain is but also why it is important. One day Blockchain Whispers will be the go-to place to start out with crypto. Not only for traders and enthusiasts. And for those new people it is important to know, why we are doing this and why we support it.
Cheers to the legend D Man!
Should you have any more ideas on what I can add or should write differently, maybe even mistakes. Comment and tell me. I want to get correct information.