So… what is the “block” and what is the “chain”? (Memorise this for your next party trick.)
The “block” refers to digital pieces of information. Imagine you’ve just bought something from an online merchant:
1. Blocks store information about transactions, say, the date, time, and dollar amount of your purchase.
2. Blocks store information about who is participating (you and the merchant), but instead of using your actual name, your purchase is recorded without any identifying information, using a unique digital signature (for example, Wonderwoman88).
3. Each block stores a unique code called a “hash” that allows us to tell it apart from every other block. (A single block on the blockchain can actually store a few thousand transactions.)
And the “chain”? “Chain” in this context refers to the public database. In order for a block to join the blockchain, the following must happen:
1. The transaction must be verified. Instead of a person or third party, with blockchain, this job is left up to a network of thousands computers (or in the case of bitcoin, about five million computers) spread across the globe. The network rushes to check that your transaction really did happen – that is, it confirms the details: time, amount, and participants.
2. The transaction must be stored in a block. After your transaction has been verified as accurate, it gets the green light, and is stored. There, it will join hundreds or thousands of others like it.
3. The block must be given a hash – a unique identifying code. The block is also given the hash of the most recent block added to the blockchain. Once hashed, the block can be added to the blockchain.
When that new block is added to the blockchain, it becomes publicly available for anyone to view – yes, even you, Wonderwoman88.
(Source: www.investopedia. com/terms/b/blockchain.asp)
Okay class, so simply put, blockchain is about record-keeping on the Internet ... and a bit(coin) more. There, lesson over.
*This article was written in consultation with Rebecca Weinrauch, chief operating officer of Grasshopper Asia, a technology-driven trading firm. (The company also has a digital asset and cryptocurrency trading division called Tilde.) Most of Rebecca’s time is spent thinking about how technology and innovation impact traditional business, market structure, and current regulation. To her, nothing is more fun than having an opportunity to do this within the context of this new digital asset class.