By now, you've probably heard the buzz of Cryptocurrency; Elon likes Doge, Bitcoin's for Boomers, Waves to the moon! But Crypto is much more than just a new digital currency, it's all about the technology it's built on, which is (say it with me now) BLOCKCHAIN!
What is Blockchain?
In the simplest of terms, blockchain is an innovative and revolutionary code. Although it is mostly associated with cryptocurrencies, blockchain can be used to store anything of value. It can be used to transact, prove ownership, or even to verify identity; the possibilities are infinite.
In more specific terms, blockchain is a peer to peer, decentralized, distributed ledger. A ledger is a database or collection of information or transactions. Think of your checking account transaction history and how it log's your deposits and withdraws, that is a ledger. It is considered decentralized as there isn’t a central authority in control of the ledger or how the information on it is disbursed. To understand the value decentralization offers, you'll need a little background on centralized systems.
What is Centralization?
Currently, most systems in place are centralized. Centralization means exactly how it sounds, there is a center; the center is the entity that has explicit control of all of the information in it's database. An easy one to consider would be your bank or credit union using the Federal Reserve.
The Federal Reserve is the center for financial institutions as the institutions must filter all transactions through them. Since all transactions must go through the Federal Reserve, this can cause transaction processes to be slow, time consuming, and human error all too common. Your funds, their availability, and it's accuracy are at the mercy of the people working for your financial institution and with 3rd party entities. Decentralization makes it so you can transact directly with each other.
What is Decentralization?
Blockchain instead is decentralized. Its ledger is available across all access points on it's network for it's whole community to view. Access points are opened by the miners in the community and are referred to as nodes.
Nodes are simply the devices that were used to download the mining software for that chain. The mining software enables the nodes on the network to communicate and share the ledger with each other. This is why blockchain is considered peer to peer (P2P), as each node is considered a peer.
Blockchain is considered a distributed network as each peer and has it's own copy of the ledger. It is also considered decentralized as the ledger relies on consensus from it's entire network to validate it's transactions, instead of on a central authority, such as the Federal Reserve.
What's Next?
In my next post, I will dive into how blockchain transactions are added to the ledger. Have questions about this or any other crypto topic? Drop it in the comments! Let's contribute to the growth of a well-educated community! Thank you for reading!