People ask, "What is a Blockchain?"

A blockchain is a digital ledger of transactions that is kept by a group of computers in a way that makes it hard to hack or change. The technology makes it safe for people to deal with each other without the help of a government, bank, or other third party.

As more records, called blocks, are added to the list, cryptography is used to link them together. Computer networks verify each transaction independently, time stamp it, and add it to a chain of data that's getting longer and longer. Once the data is recorded, it can't be changed.

Blockchain technology has become popular because of the rise of bitcoin, ethereum, and other cryptocurrencies. It can be used for legal contracts, property sales, medical records, and any other industry that needs to authorise and record a series of actions or transactions.

 

In what ways does a blockchain work?

Blockchain technology may be the best thing since the internet itself. People can exchange value without having to trust each other, and there is no need for a central authority. If you and I bet $100 on the weather in California tomorrow, what would happen? I think it will be sunny. You think it will rain. Today, we have three ways to handle this transaction:

 

• We can trust one another. Rain or shine, the loser will give the winner $100. If we're friends, this could be a good way to deal with it. If you're friends or not, it's easy for one to not pay the other.

 

• We can turn the bet into a deal. People will be more likely to pay if there is a contract in place. The winner will have to pay more money to cover legal costs if either of the two don't pay. The court case could take a long time. Even if the money is small, this doesn't seem like the best way to handle the transaction.

 

• We can ask a neutral person to help us. Each of us gives $100 to a third party, who will give the total amount to the winner. The third party will give the winner the total amount. Then again, she could run away with all our money. So we end up with one of the first two choices: trust or a deal.

 

Trust and contracts aren't the best ways to solve problems: It takes a lot of time and money to enforce a contract. We can't trust strangers. This technology, called "blockchain," is interesting because it gives us a third choice that is safe, quick, and cheap.

It's possible to write a few lines of code and send $100 to a programme running on the blockchain. This programme will keep the $200 safe and automatically check the weather for tomorrow on a number of different sources. It doesn't matter if it's sunny or rainy; the winner will get the whole amount. Each party can look at the contract's logic, but once it's on the blockchain, it can't be changed or stopped once it's been set. This may be too much work for a $100 bet, but what if you were selling a house or a company?

 

This article doesn't go into great detail about how the blockchain works, but it does enough to give you a general idea of the logic and mechanisms at work.