It’s like asking what is Internet back in the 90s. It’s something important and get mentioned a lot but few people know how it works.
It is a secured way to transact over the internet by getting as many people as possible to witness the transaction. Blockchain is the invention of Satoshi Nakamoto. You can check out the previous video I did about this mysterious person.
So, what is Blockchain?
Imagine I’m buying a cup of coffee from you over the counter. I pass you money, you pass me coffee. Instead of a receipt, we get the people present around the place to whip out their phones and take a snap shot of the transaction. Typical of today’s mob, they would upload the pictures onto Instagram or Facebook.
And you know what they say; anything on the internet stays on the internet forever.
This makes the transaction very secured because we have so many people bearing witness to our transaction. It makes it hard for either of us to want to cheat the other party because of all the evidence captured in all the hundreds of phones. Even if we have a friend in the crowd who decides they want to help us doctor the photo, we still wouldn’t be able to pull it off because it’s going to be the odd one out amongst the hundreds.
This is effectively what makes Blockchain so secured that it has the ability to act as a currency to facilitate payment between two strangers in any part of the world.
Now we come to the next part about Blockchain. How is the data stored? Remember there’s the part I mentioned about the mob posting the evidence on social media platforms like Facebook and Instagram? The posts appear by timeline right? And new posts appear on top of it or beside it, and over time as most posts come in, the older posts gets buried.
That’s how Blockchain stores data. Every transaction between two people is being broadcasted to everyone in the network to bear witness. The record is stored in a ledger called a block. It is permanent and cannot be edited. Over time, the blocks just grow longer and longer and longer, forming a chain. Thus, earning its name - Blockchain.
The Blockchain ledger is almost a thousand gigabytes at the time of this recording. So who are these people who are helping keep track of the ledgers? It's stored in every mining computer, every computer that has a wallet and by special sites that give Blockchain monitoring services.
It’s spread around the world so if there was a chance of it being hacked, it needs to be globally orchestrated and at the same time. Not impossible, just highly improbable.
The simple analogy I gave above is just a way to get quick understanding of Blockchain. Unlike the coffee buying example, your identity on Blockchain is anonymous. Every user has a public code and a private code that allows them to pay and receive. When you make a transaction, the information about your identity that is stored in ledger and viewed by everyone is the public key. It’s kinda like your credit card. The first 16 digits isn’t a secret; your CVC number (the 3 digits on the back of the card) is.
That ladies and gents, is why Blockchain is used by most of the alternative coins that have emerged. It’s the main driver, the bedrock, that facilitates a trusted peer 2 peer transaction. The difference between one coin from the rest of the other thousands out there is the purpose they serve. These days you can find a coin for almost anything.
In the next part of this series, we look at what Bitcoins alternatives and how you should pick which to invest in.