I’ve been hearing the term “block chain” come up more and more in discussions about finance, cryptocurrency, and global shipping. It seems important, but I’ve struggled to find a clear explanation of the concept. What is a block chain, and what makes it so important?
In: Technology
So imagine you’re keeping track of transactions in a ledger. (Book of transactions)
Everyone else is also keeping this list of transactions in the same ledger.
Let’s say you have $5 and give that money to someone else.
You write in the ledger:
Me -$5 someone else: +$5
Then you each send that transaction to other people keeping the ledger so they can update theirs.
This is kind of part 1 and part 2 is what really makes it the “blockchain”.
The problem comes with verifying how much money any person has.
If I send you $5 and then send another person that same $5 what do people write down on their transaction ledger? Obviously the first one goes first.
So what happens is every once in a while a block is “written” and all the transactions in that block are sort of locked in.
Any disagreement between people keeping ledgers is solved by consensus. The most common transaction list is the truth.
So a transaction is written on the ledger, sent to other ledgers, and then made complete the next time a block is written.
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