WHAT IS BLOCKCHAIN?
At the heart of cryptocurrencies like Bitcoin is the electronic ledger, or blockchain, which keeps a permanent and unalterable record of every transaction ever made. It’s this that prevents people creating counterfeit Bitcoins. The whereabouts of every genuine transaction is updated on the blockchain, along with a version of the same information that’s been mathematically transformed – ‘hashed’ – in a way that produces a radically different outcome if the information is tampered with. Any attempt to amend a transaction will produce a mismatch that’s instantly spotted. For added security, the hashed version of each transaction also depends on parts of the previous transaction, plus some extra ingredients.
Maintaining the blockchain is the job of so-called ‘miners’, who generate the hashed information using computers and are rewarded for their work with newly minted Bitcoins. It’s getting to be a tougher job, as the process of updating the ever-growing blockchain gets more demanding. While once the task could be completed using a home computer, it now requires vast processor farms.
This was all envisaged by Satoshi Nakamoto, the originator of Bitcoins. He wanted to limit their total number to around 21 million, so that they would keep their value over time. That target should be reached by 2140.
What he may not have foreseen were the myriad other uses of the blockchain idea in creating trusted records. Traditional banks are investigating its use for verifying electronic transactions, while hospitals and energy companies are eyeing its use for patient and customer databases.