What Is A Blockchain?

Short answer… When transactions are processed on a cryptocurrency network, they’re first sorted into groups, or ‘blocks’.

These ‘blocks’ of transactions are then processed one after another, in a chain. A block-chain.

Long answer… Think of a blockchain as a transaction list that is uploaded to thousands of computers around the world. If someone sends money to you, that transaction gets added to a queue.

Queued transactions are sorted into groups (aka ‘blocks’) and then processed by one of the thousands of computers operating in the cryptocurrency’s network.

Once the transaction is complete, it appears on the public transaction list, or ‘chain’.

For every block of transactions a single computer completes, it is rewarded with a specific amount of cryptocurrency.

There are two common methods used to win the right to process a block of transactions: Proof of Work and Proof of Stake.

In Proof of Work, each computer completes a complex math problem; the first to solve the problem and ‘prove the work’ wins the right to process the block.

In Proof of Stake, a computer wins the right to process a block based on how long it has been validating transactions and how many coins it has staked in its account (or ‘stake pool’).

Ok, so what stops one of these computers from lying about the transaction value and skimming some cold, hard cash off the top?

Because this transaction list is sent publicly to thousands of individual computers worldwide, if one of them tries to alter the transaction values, the others all call bullshit, and they lose the transaction.

This way, digital payments can be sent securely without any centralized control (aka banks). Pretty neat.