What is Blockchain Technology? – 101 Basics

The blockchain is a system that records information in a way that prevents alteration, distortion, hacking, or cheating of the system. A blockchain stores small pieces of information in a public database called ‘blocks,’ and each block has a unique reference. This then links to each block, forming ‘the chain.’ This process enables anyone on the network to observe all activities in real time. It also makes it nearly impossible for a user to gain control of the network. Blockchain is the record-keeping technology behind Bitcoin and other digital assets.

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A simple explanation?

A school has organized a trip for its students. The organizers have asked each student to carry a packed lunch. Student Y has cookies and a bottle of soft drink. Student X on the other hand, has a full lunch box packed with sandwiches and fruit. At lunch, student X agrees to trade a small portion of their lunch box for Student Y’s cookies. As the trade takes place, all other students at the lunch table are witnesses to the exchange. The class teacher notices the exchange and wants to find out more, so asks the class to explain. The entire class respond in unison with the exact same account of the exchange.

In the above example, student Y and student X can be defined as cryptocurrency users, crypto owners, or crypto traders. The lunch boxes are the digital assets (cryptocurrencies) that the two traders are exchanging, and the table is the “Blockchain” or the platform that supports this transaction. The entire class are the traders or “peers” witnessing the transaction. The class teacher’s request to understand the detail of the trade is the approval or validation stage of the transaction. On a normal trading platform, using this analogy, all students could trade their lunch boxes, with the other students acting as the peers who witness it.

Can I view the blockchain?

The answer to this question is absolutely yes! Fundamentally this is one of the most important aspects of the blockchain behind cryptocurrency and using blockchain technology. Every transaction is recorded on the blockchain and everyone has access to it. You can find and watch a transaction including its progress in real-time, online using a blockchain explorer. You can search online for various blockchain explorers, simply by entering your wallet address, and you will see all transactions that have ever occurred or are in progress.

Here is an example of viewing the blockchain for a given Bitcoin wallet address. Essentially it’s the same as entering a bank account number and seeing how much the account holds, plus all the historic transactions. The key difference is that you can look at any bank account you want, it’s public.

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Blockchain technology supports participants (traders) as they engage in the transaction of digital assets. The peers on the Blockchain are the witnesses, as traders reach a consensus to transact their assets. The peer-to-peer transactions are guided by the rules set under the contract, which contains the parameters guiding the transaction. Moreover, this concept also elucidates the idea of ‘decentralization’ in Blockchain technology. Additionally, the Blockchain ensures the security of all transactions by securely maintaining records.