So, what is Blockchain?

(Note: There are a variety of different blockchain implementations that exist today. For the sake of keeping it simple this section will explain blockchain as Bitcoin uses it since it was the first implementation)

The first thing to note is blockchain does not equal Bitcoin! In order for Bitcoin to work it uses blockchain technology, however blockchain technology does not need bitcoin to function. So you can consider Bitcoin one of the first successful applications to use blockchain.

To explain what blockchain is as simply as possible I’d say:

Blockchain technology is an efficient way to get groups of people, or people who have never met to agree on one common version or truth, of something digital.

When we share something on the internet it can be copied infinitely. Although this is great for sharing information, it wouldn’t a great idea if something of value could be copied. Imagine sending a friend $5 and then finding out the $5 was copied to $5000. It would make for a terrible financial system.

One agreed upon version of something is really important, especially if it involves a record of how much money people have. The way to establish this one version of truth is by using a chain of blocks that people can look back at and check. (Get it? BLOCK — CHAIN!)

The blockchain is created by people running software on their computers. Anyone in the world can download a copy and help run the network. In order to use the network, people use a currency, in this case Bitcoin.

When people send or receive money, it is confirmed by the network and written onto the blockchain. From the beginning of the currency supply, all transactions made are stored and written on the blockchain, so at all times there is a record of who owns what.

For example, let’s say there are 10 Bitcoins in existence. Bob owns 7 and Alice owns 3. Bob wants to buy something off of Alice, so he send Alice 5 Bitcoins. Then the blockchain would look something like this

Once something is put on the blockchain it can never be edited, removed, or deleted. Which means this blockchain record is the final version we can always rely on, as it is up to date and the final “truth.”

Imagine the Blockchain as a really secure Google Document, and traditional systems like a regular Word Document. If you’re using a regular Word Document, two users can’t make edits at the same time. You have to wait until someone sends a copy to you, then you have to edit it, and then send it back.

With Google Docs, every party has the same document and can edit it at the same time. One single updated version of the document is visible to everyone. Best of all if you ever need to look back to see who wrote what, or when an edit was made, a revision history is available to look back at.

What makes blockchain and a Google Doc different, is that for a blockchain you don’t need to rely on a company like Google to maintain your document.

There are a lot of protocols and rules that define how exactly a blockchain network runs. There are also structures in place to ensure people are motivated to act in the best interest of the network.

However, at a very high level, this is all there is to the blockchain. A community kept record that can never be tampered with.

This gives a blockchain the following qualities:

• Distributed: The network has no single failure point. To take down Bitcoin you would need to destroy every single computer.
• Decentralized: No single person or organization owns the blockchain. It is owned and run by the community.
• Peer to Peer: You can interact and send currency to anyone for a really low fee. You also have the power to hold all your money. No bank account is needed.