Let’s Talk About Blockchains

Let’s Talk About Blockchains

You see the word “blockchain” everywhere these days, but many people have no idea what a blockchain is.

Imagine a shared, digital notebook that everyone can see. Every time someone makes a transaction (like sending money or buying something), it’s written down as a “page” in this notebook. These “pages” are called “blocks.”

Once a “page” (block) is full, it’s chained to the previous “page” (block) using a special kind of digital “glue” that makes it impossible to rip out or change a page without everyone noticing. This “glue” is cryptography.

Because everyone has a copy of this notebook, no single person can change the records. If someone tries to cheat and change a page, everyone else can see the original, correct version.

That’s a blockchain! It’s a shared, secure, and transparent way of keeping track of things, making it useful for anything from money and contracts to tracking where your food comes from. It cuts out the middleman and builds trust because everyone can see what’s happening.

Blockchains are essential to cryptocurrency

Blockchains enable cryptocurrency transactions to happen directly between people, without a central authority like a bank.  Blockchains’ decentralized and cryptographic nature makes them very secure and resistant to hacking.

Imagine a shared, digital notebook where everyone can see all the transactions. When someone sends cryptocurrency to another person, it’s like writing it down in this notebook. These entries are grouped together onto “pages” (blocks), and these pages are chained together to create a permanent record of all transactions. This notebook is copied and shared across many computers, making it secure and transparent.  

All transactions are recorded on the blockchain and are publicly viewable, promoting trust and accountability.   Essentially, blockchains provide a secure and transparent foundation that allows cryptocurrencies to function as digital currencies.

What makes cryptocurrencies like Bitcoin, valuable?

Just like gold or other precious metals, many cryptocurrencies have a limited supply. For example, Bitcoin has a hard cap of 21 million coins. This scarcity can drive up demand and thus, price. If there’s only a limited amount of something, and people want it, it becomes more valuable.

Like anything else, the value of a cryptocurrency is heavily influenced by supply and demand. If more people want it, and the supply is limited, the price goes up. Increased acceptance of cryptocurrencies by businesses and individuals boost demand. Increased demand increases the value of cryptocurrency.

If you want to learn more about cryptocurrencies, you’ll find a great beginner’s guide here.

If you’re interested in digging deeper into understanding blockchains, check out this article from Investopedia.