The world of cryptocurrencies can be polarising and downright confusing. Our investment team has broken down the underlying technology behind the coins to help you make sense of the crypto craze. (Reading time 3:43 mins)
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Blockchain rose to prominence in recent years as the underlying technology powering Bitcoin and other cryptocurrencies. However, it has many more applications that extend beyond internet money. Blockchain allows information to be digitally distributed but not copied, effectively creating the backbone of what some believe is the greatest technological advancement since the Internet.
But what exactly is Blockchain? Who created it? And what can it be used for outside of the cryptocurrency space?
What is blockchain?
Blockchain is a continuously growing list of records, called blocks. These blocks are linked and secured using a process called cryptography. Each block contains three things – a timestamp, transaction data and a link to the previous block.
Blockchain is an open source, publicly available distributed ledger typically managed by a peer-to-peer network (as opposed to a centralised operator such as a bank). It collectively adheres to a protocol for validating new blocks. Once recorded, the data in any given block is immutable, and therefore cannot be altered without alteration of all subsequent blocks – which requires collusion of the network majority.
To use a more familiar reference point, visualise an excel spreadsheet that is duplicated and distributed across a network of computers. Imagine that this network of computers is designed to regularly update this excel spreadsheet, and you’ll have a basic understanding of blockchain.
This way of using the network is hugely beneficial – the database is not stored in any single location meaning that records are kept public/easily verifiable; and as no centralised version of the information exists, it’s unable to be hacked given it’s hosted by millions of computers simultaneously.
Learn more about how Blockchain is transforming more than just cryptocurrencies.