A lot has been written in the press recently about Blockchain technology. Technology companies, financial institutions and even entrepreneurs are starting to consider the use cases and potential impact of Blockchain technology. Despite this press coverage and pontification, fundamentally, it seems to me, there is a seriously lack in understanding of what Blockchain technology is. The motivation behind this series of blog posts is to simplify and demystify Blockchain technology.
Block chain technology, in my opinion, has three main elements:
This can be anything that needs to be recorded. Simple example of a transaction is money being transferred from one bank account to another.
2. Decentralised Ledger
This is just a fancy name for a distributed database. "Oh right?" I hear you exclaim followed by "What's a distributed database?". You have a database. Lot's of other people have the same copy of this database. That is a distributed database. By it being distributed it's decentralised i.e. there isn't just one central copy of the database. All transactions are recorded in this distributed database known as the Decentralised Ledger.
There needs to be a magical process to add new transactions to all copies of the Distributed Ledger (distributed database). This magical process needs to be able to a) update all copies of the database, b) ensure previous transaction cannot be edited, updated or tampered with. This magical process is known as mining.
But why is it called a Blockchain? What is the point of all this? Where is it useful? What are the advantages? All good questions friends. Stay tuned for part 2.