Crypto-what? If you've attempted to dive into this mysterious thing called blockchain, you'd 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 just what a crytpocurrency is and how blockchain technology might change the world, let's discuss what blockchain actually is.
In the easiest terms, a blockchain is a digital ledger of transactions, not unlike the ledgers we've been using for hundreds of years to record sales and purchases. The event of the digital ledger is, actually, pretty much identical to a traditional ledger in that it records debits and credits between people. That is the core concept behind blockchain; the difference is who holds the ledger and who verifies the transactions.
With traditional transactions, a payment from one person to another involves some kind of intermediary to facilitate the transaction. Suppose Rob really wants to transfer �20 to Melanie. Best Wallets For Ethereum can either give her cash in the form of a �20 note, or he is able to use some type of banking app to transfer the money directly to her bank account. In both cases, a bank is the intermediary verifying the transaction: Rob's funds are verified when he takes the amount of money out of a cash machine, or they are verified by the app when he makes the digital transfer. The lender decides if the transaction is going ahead. The bank also holds the record of most transactions created by Rob, and is solely responsible for updating it whenever Rob pays someone or receives money into his account. Basically, the bank holds and controls the ledger, and everything flows through the lender.
That's a lot of responsibility, so it's important that Rob feels he is able to trust his bank otherwise he'd not risk his money using them. He must feel confident that the bank 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 when it was found that banks were being irresponsible with our money during the financial crisis of 2008, the federal 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 a single key respect: they are entirely decentralised. There is absolutely no central clearing house such as 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, all 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 across the network of nodes and makes certain that everybody gets the same version of the ledger at any given time
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Author : Riis Roberts |
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