If you’ve been hearing about cryptocurrencies like Bitcoin and want to understand what all the excitement is about, start with blockchain technology.
Bitcoin couldn’t exist without blockchain technology, but explaining the technology (blockchain) isn’t as as easy as explaining the currency (Bitcoin). We’re all familiar with the idea of money.
I’m going to expand on a common phrase used to explain blockchain — encrypted, decentralized, ledger — and how each word can help you gain an understand of blockchain.
en·crypt – to convert data into a cipher or code, especially to prevent unauthorized access
The blockchain is composed of connected “blocks” – a set of transactions where each transaction is represented by a large number. Each block includes an encrypted signature of the previous block, creating an unchangeable and linear record of activities. As more blockchain transactions take place, the system actually gets more secure.
Public key cryptography – using a public and private key for verification – is used to establish ownership in the blockchain. The private key is like your signature, and providing it is like shaking someone’s hand to seal a transaction.
de·cen·tral·ize – the transfer of authority from a single entity to many