Blockchain Technology

Blockchain is not just Bitcoin.

Blockchain is the technology that Bitcoin and other cryptocurrencies are built on. To simplify, it is an immutable and permanent record of every transaction that has ever been completed on a particular database. This information is not stored anywhere central, rather it is distributed and kept upon separate ledgers or databases that are updated and stored on the individual computers that make-up a network. For example, a bank might use blockchain technology to record employee information – this data would not be stored anywhere central as it would be stored and updated on the blockchain in the individual computers that constitute the bank’s network.

The addition of information to the blockchain relies on complex cryptography, algorithms and protocols which make the system “unhackable”. In order for a hacker to penetrate the system they would have to hack into every member computer and every block in the chain simultaneously. This means that blockchains are extremely secure.

The secure and immutable nature of blockchain technology means that these networks can do away with the need for trusted third parties to act as middlemen in settling transactions of value. As there is no opportunity for fraudulent behaviour within the blockchain, transactions can be settled directly between two parties without having to pay for expensive middlemen to secure and validate the transaction. There are an infinite number of potential real world applications for the exchange of anything of value that can be kept in digital format.   

Each of the new digital currencies that is released is theoretically built upon a new and improved blockchain that solves real world problems. Often businesses that want to benefit from that technology are required to buy the currency in order to build on top of the technology.  This can be a factor in determining the value of some digital currencies.