Blockchain is software that “mimics the way financial institutions work with each other around the world.” It is a digital, decentralized, public ledger that copies and tracks assets—things like money, stocks, and bonds—between digital parties.
The main difference between blockchain and cryptocurrency (and let’s be real here, I know this is a history of technology article and not a biology one, but bear with me) is that the former deals with assets, and the latter deals with data.
So first, how does blockchain securely move assets from one person to another? Well, instead of having just one central organization taking care of the ledger, it relies on lots of different computers in lots of different locations. Each of these locations has its own copy of the ledger and updates it with new transactions—but only if all those other computers agree that it’s a legitimate update and not an attempted hacking. The other computers verify and approve these transactions in tangent with cryptographic techniques.*
*With cryptographic techniques, a user’s personal information (the details of the transaction) stay private yet can still be verified by anyone who receives it—it’s like sending an email to someone, and then they can open it and read it, but they don't get to see where the email came from or who it’s addressed too. And if there is any attempt to fake a transaction, the ledger checks multiple times to make sure everything adds up.
This process really doesn’t work well for data, though; you need a much simpler solution to keep track of that stuff. This is where cryptocurrency comes in. I don’t want to dig into all the math and cryptology that went into creating this type of online money; if you’re curious, you can get started right here. But basically blockchain stores every cryptographic key that recognized transactions or transfers multiple times on different locations in its system; each time a unit of currency is exchanged, those locations need to run complicated calculation algorithms to verify that unit of currency and record it on the ledger. In effect, you have a trusted public database of keys that has been built up over time over the internet that acts as a way to record all transactions online. Cryptocurrency happens when applications like bitcoin use this database to keep track of currency transactions (new bitcoin is created when you add units as rewards for helping verify transactions).Sitemap