Introduction

What did a pre-blockchain world look like?

Governments have a hand in many of our everyday decisions when they lay down rules we should abide by and standards of acceptance. This is how we judge almost everything - if money is real or fake, or how what we buy is genuine, or to what standard we should perform tasks like driving or educating our children.
Almost every part of our lives is influenced in some way by a third party or overarching centralised authority figure.

The key to validating if something is legitimate has always been the job of an overarching central authority.
This is because two parties looking to conduct a transaction have a natural tendency to distrust each other knowing both of their self-interests lie in defrauding the other.
But while a centralised authority is capable of playing the role of neutral mediator successfully, there are still flaws in the system, particularly with issues centred around trust.

Despite it being the overwhelming system of choice throughout history and still today, a centralised authority offers power to a single entity and a select few.

Those with absolute authority have a vested interest in remaining in charge, which can often influence their performance bringing a greater risk of abuse of power, corruption and manipulation.
The risk of a rogue authority means the legitimacy of a third-party validation system is thrown into question.

How did blockchains change the status quo?

Many throughout history tried to find an alternative system to end the reliance on third-party involvement in transactions, there seemed to be no way of solving this issue.

1980s

The programming of digital currency was first attempted in the 1980s, but consistently failed to solve issues of the double spend problem.

This was until Bitcoin was born on the back of its revolutionary blockchain technology, while enabling two untrusting parties to safely and securely transfer funds while eliminating the need for third-party involvement.

The key to transferring and using cryptocurrency is in its use of blockchains. The blockchain is stored as an identical digital record multiplied many times within a cryptocurrency system.

These blockchains are a public record of where all the cryptocurrency is being held at all times and proves who owns what. There is no way of cheating the system to steal, duplicate or erase cryptocurrency without convincing the entire network the transaction is valid.

The many users within this system with copies of this public record are called nodes, and they continuously compare their records to make sure they all have matching transactions.

NodesNodesA single computer connected to a blockchain’s network.
When a transaction happens, it is only approved if all blockchains match up. The nodes making up the system are key to the blockchain’s decentralised function.

The entire network is required to validate and legitimise transactions, which is a significant departure of how banks verify as a single entity.

This requirement of an all-in approval is the key to legitimising the first successfully programmed decentralised system of transfer, and what makes cryptocurrency arguably more secure than fiat currency systems.

Blockchain technology is making a significant global impact because of its decentralised characteristics and self-reliance. But mostly for its ability to make us question whether continuing with the single-entity verification system standard utilised throughout history is the best way forward. 

Blockchains: Introduction

FAQ

What is a blockchain?
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The key to transferring and using cryptocurrency is in its use of blockchains. The blockchain acts as a ledger, producing and storing a public record of every single transaction made on its network. The blockchain is stored as an identical digital record multiplied many times within a cryptocurrency system.

Why were blockchains invented?
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Many throughout history tried to find an alternative system to end the reliance on third-party involvement in transactions. Initial attempts failed to solve the double spend problem, or the risk of digital counterfeiting and theft. Bitcoin solved these issues on the back of its revolutionary blockchain technology, enabling two untrusting parties to safely and securely transfer funds and eliminating the need for third-party involvement.

Can blockchains be hacked?
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There is no way of cheating the system to steal, duplicate or erase cryptocurrency without convincing the entire network the transaction is valid. The many users within this system with copies of this public record continuously compare their records, and immediately know when a hack is being attempted.

Next step: Function

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