The Blockchain Definition
Think about your use of data storage. Many of us may arrive at spreadsheets where tech-savvy or engineering folks may think of databases.
Imagine that you are the financial controller of a global company and are tracking every transaction in a spreadsheet. Pretty quickly you would need something more powerful, automated even. Just like a spreadsheet, common databases (such as SQL) are rows of text which are created, read, updated or deleted by applications like servers, websites or phone apps.
With those examples of traditional data storage fresh in our minds: a blockchain, by definition, links “blocks” of data together to collect a chain of cryptographic data. This is revolutionary because as blocks are added they cannot be changed without affecting all other blocks. As you can imagine, this concept applied to say the accounting of items such as digital goods, inventory or even finances and money would be far superior to old-school databases and paper accounting.
Bitcoin is not the first blockchain but is by far the most famous due to several brilliantly integrated concepts which lead to its global adoption. A publicly distributed ledger keeps a record of every transaction in a blockchain’s history and BTC is no different. A peer-to-peer network of miners handle the cryptology of these blocks of data, releasing Bitcoins as a reward, but also leverage the computing power to simultaneously update the public ledger for all of us.
Distributed Ledger Technology (DLT)
As mentioned, Bitcoin’s blockchain movement simultaneously updates a public ledger which contains all historical records. Every network participant shares this ledger and thus should agree and trust its information. When any BTC transaction occurs anyone can view it with that blockchain’s “explorer”. Take a look at the original Blockchain.com/explorer. This is extremely useful for many reasons such as tracking nefarious transactions, a trusted accounting record and any kind of validation you think up.
The “distributed” aspect of this record keeping is also important. Since existing block data cannot be changed it is important that we share the chain and thus all have a copy of this official ledger. Each update happens across all Bitcoin nodes. Since all nodes are updated with this same ledger information it could never be destroyed or manipulated. If one node becomes out of sync or data is broken for any reason it can correct itself via data from other nodes.
A manipulated node would be a glaring error when compared with the many other consistent references.
Blockchain transactions can be programmed with logic called a “smart contract”. The concept is simple, if I’ve paid some required amount to this “wallet” on the blockchain then my side of the contract is fulfilled and I will be sent something of value. Think gift card number or an access code or anything else you can dream up. The benefits of these contracts is infinitely useful and is being increasingly trusted to track food shipment and the origins of E. coli.
Finances and Money
While most blockchains include their own token-economics Bitcoin, Etheruem, Stellar and many more organizations maintain a blockchain ecosystem for their own use and open-source adoption. Not only can you build on top of their blockchain for any digital asset but each include their own native asset which is a store-of-value token.
Bitcoin has Bitcoins (BTC), Ethereum has Ether (ETH) and Stellar has Lumens (XLM) however, there are several interesting types of tokens such as non-fungible tokens or NFTs.