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What is blockchain?

The most simple method of understanding the blockchain is thinking of it in terms of a digital bank operating system. A blockchain is a decentralised (meaning not one institution has custody over it) digital ledger that tracks transactions using secure and trustless protocols.

 

Imagine a hive of computers (known as nodes) that constantly battle each other to compute and process all transactions that took place at any given time. The first to solve the challenge and ‘compile the correct ledger’ gets rewarded; meaning that no one computer or person can fake a transaction as all the others would flag it.


Trust is incentivised.

But blockchain, cryptocurrency and Bitcoin are not the same. Bitcoin is a cryptocurrency, like rand or dollars, that run on a blockchain. These cryptocurrencies (like Bitcoin and Ethereum) are merely a few lines of code (known colloquially as tokens) in a ‘smart’ contract that gets executed.


A smart contract is usually coded in 'Solidity'.


For example, person A (denoted as number, say 0x62793..982) sent money (or tokens) to person B (say 0x8734...123) and the entire transaction is recorded as transaction number 0x347...896. These numbers are all open and transparent on the blockchain, making things such as token provenance and authentication (in the event of NFTs) so valuable.


In other words, imagine a large marble block engraved with all of the transactions of the blockchain. Say you want to send 10 tokens to a friend. All the nodes (computers) go back to the older marble blocks to check whether you have 10 tokens to begin with, as these blocks cannot be altered and show all transactions publicly.


Once verified, the nodes make an engraving on the new block stating that you will have 10 fewer tokens and that your friend will have 10 more tokens.


And that’s that.



Cryptocurrency is merely one use case for blockchain, it can also be used in Decentralised Finance, Decentralised Autonomous organisations (DAOs), dApps and NFTs (or digital collectibles) in art, fashion, music and many more. Blockchain is fantastic, and when utilised responsibly, with the correct environmental concerns taken into consideration, it can truly add a ton of value to almost each industry.


 

For more information contact collin@fanfire.ai

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