What is a blockchain?
A shared ledger that many computers keep together: blocks, hashes, nodes and why history cannot be rewritten.
A blockchain is a ledger — a list of records — that is shared by many computers instead of being stored in one place. New records are added in groups called blocks, and each block is linked to the previous one, forming a chain.
Blocks and hashes
Each block contains transactions and a hash of the previous block. A hash is a short "fingerprint" of data: if even one character of the data changes, the fingerprint changes completely. Because every block includes the fingerprint of the one before it, changing an old block would break every block that follows.
Nodes
Computers that keep a copy of the blockchain are called nodes. They check each new block against the network's rules and reject invalid ones. Because anyone can run a node, the network does not depend on a single company.
Agreeing on the next block
Many participants could try to add different blocks at the same time. A consensus mechanism decides whose block is accepted — for example, proof of work or proof of stake. Read Proof of work and proof of stake.
Public and private keys
Users control their funds with cryptographic keys. The public key (and the address made from it) can be shared to receive funds. The private key signs transactions and must stay secret.
What blockchains are good at
- Keeping a history that is very hard to change.
- Working without a central operator.
- Making records transparent and checkable by anyone.
Limitations
- Limited speed and capacity compared to central databases.
- Mistakes cannot be undone.
- Public blockchains show every transaction, so privacy is limited (addresses are pseudonymous, not anonymous).
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