Notes

A Brief Introduction To Blockchain - For Normal People
Crypto-what?
If you've attempted to dive into this mysterious thing called blockchain, you would be forgiven for recoiling in horror at the sheer opaqueness of the technical jargon that is often used to frame it. So before we enter what a crytpocurrency is and how blockchain technology might change the world, let's discuss what blockchain happens to be.

nft artwork In the easiest terms, a blockchain is really a digital ledger of transactions, not unlike the ledgers we have been using since way back when to record sales and purchases. The event of this digital ledger is, in fact, pretty much identical to a traditional ledger for the reason that it records debits and credits between people. This is the core concept behind blockchain; the difference is who holds the ledger and who verifies the transactions.

With traditional transactions, a payment in one person to another involves some type of intermediary to facilitate the transaction. Let's say Rob wants to transfer �20 to Melanie. He can either give her profit the form of a �20 note, or he can use some type of banking app to transfer the amount of money directly to her bank-account. In both cases, a bank may be the intermediary verifying the transaction: Rob's funds are verified when he takes the money out of a cash machine, or they are verified by the app when he makes the digital transfer. The bank decides if the transaction is going ahead. The bank also holds the record of most transactions made by Rob, and is solely in charge of updating it whenever Rob pays someone or receives money into his account. In other words, the bank holds and controls the ledger, and everything flows through the lender.

That's a large amount of responsibility, so it is important that Rob feels he can trust his bank otherwise he would not risk his money with them. He needs to feel confident that the lender will not defraud him, won't lose his money, will never be robbed, and will not disappear overnight. This dependence on trust has underpinned almost every major behaviour and element of the monolithic finance industry, to the extent that even though it was found that banks were being irresponsible with our money during the financial crisis of 2008, the government (another intermediary) chose to bail them out rather than risk destroying the final fragments of trust by letting them collapse.

Blockchains operate differently in one key respect: they are entirely decentralised. There is absolutely no central clearing house just like a bank, and there is no central ledger held by one entity. Instead, the ledger is distributed across a massive network of computers, called nodes, each of which holds a copy of the complete ledger on their respective hard disks. These nodes are linked to one another via a piece of software called a peer-to-peer (P2P) client, which synchronises data over the network of nodes and makes sure that everybody has the same version of the ledger at any given point in time.

When a new transaction is entered into a blockchain, it is first encrypted using state-of-the-art cryptographic technology. Once encrypted, the transaction is changed into something called a block, that is basically the term useful for an encrypted band of new transactions. That block is then sent (or broadcast) into the network of computer nodes, where it is verified by the nodes and, once verified, offered through the network in order that the block can be added to the finish of the ledger on everybody's computer, under the list of all previous blocks. That is called the chain, hence the tech is known as a blockchai
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