What is a Blockchain?
Let’s just start the answer, and then, we’ll unpack what it means and why it matters:
A blockchain is a decentralized public ledger that records transactions across many computers in such a way that records cannot be altered without the consensus of everyone in the network.
Now, let’s jump all the way back to the 1980s. In the films Wargames and Ferris Bueller’s Day Off, the main character (in both instances, Matthew Broderick) hacks his school’s computer in order to change his grades and/or attendance records.
It was as simple as it looks in the two video clips linked above. Without a system of checks-and-balances… without a method of verifying that the transaction (in this case, changing an F to a C) is valid, the protagonist acts with impunity to do whatever he wants.
Consequences be damned.
Today, the very core of how blockchains work prevents shenanigans such as these from happening. Now we know what you’re thinking–aren’t blockchains for buying, selling, and swapping cryptocurrencies? Why are we talking about high-school grades?
The answer: as a digital ledger, blockchains can validate any type of transaction, and while they’re best known for their widespread usage in cryptocurrencies, they’ve also been applied to NFTs, tokenized real estate, and even the tracking of pharmaceutical drugs in order to prevent counterfeit medications from hitting store shelves.
And, in the future, we’re likely to see blockchain technology deployed in even more use cases such as in bank transactions, retail goods, and yes, even academic records — sadly, you’re going to have to earn that C the right way.
More than one blockchain. More than one consensus mechanism.
You already understand that blockchains can’t be altered or erased the way that a traditional database can. Since many computers (all distributed and decentralized) maintain a record of transactions, there’s no way of making changes without the consensus of the network.
But, just as there’s more than one blockchain, there are also multiple ways for consensus to happen.
The most well-known blockchain — Bitcoin — utilizes a “proof of work” mechanism whereby participating validators must solve a not-so-insignificant mathematical puzzle in order to validate a particular transaction.
Other mechanisms include “proof of stake” (in use by BNB Chain and now also Ethereum), whereby participants validate transactions based on the number of tokens they stake.
Summing it up.
If tokens are akin to money, then blockchains are the underlying infrastructure that make it possible to buy, sell, and swap them. Without blockchains, swapping cryptocurrencies would look a lot like sending traditional cash through the postal service. Sure, it might arrive at its destination, but if it didn’t, you’d have no idea what went wrong (or where or when).