The truth about blockchains
Blockchain is the new ‘hotness’ in the innovation world, but like all new technologies, it is widely misunderstood.
A blockchain is a set of difficult mathematical computations, based on cryptography. Participants in the chain provide transactions to it. Some participants perform the maths of encoding those transactions into the chain. This happens at a regular interval. Once encoded into the chain, each transaction is public and permanent.
Bitcoin, which is the poster child for the technology, is a blockchain used as a currency. It relies on ‘miners’, or the participants who encode the transactions into the chain. These miners get rewarded with a newly created bitcoin each time they do this. So there can only be a fixed number of bitcoins created, which provides the basis of bitcoin’s value – it has scarcity and trust.
Ethereum is another popular blockchain currency. Ethereum provides a service for designing and executing ‘contracts’, which is a term used to describe for small amounts of computer code.These contracts can interact with the chain and with other code.
For example, a contract can accept bids on an item and confirm the highest bid after a set period. Ethereum raises funds for projects using these contracts.
The major feature of these cryptocurrencies is that they are not backed by any organisation; anybody can start a new currency.
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