May 18, 2018

What Is a Blockchain?

So, what is a blockchain? It's a complicated question because the inventor of Bitcoin, the pseudonymous Satoshi Nakamoto, didn't use the term in the original Bitcoin paper. For many, “the blockchain” is nothing more than a shorthand for "how Bitcoin works." But more usefully, the blockchain is a distributed ledger, shared by untrusted participants, with strong guarantees about accuracy and consistency. What does that mean? Let's unpack it term by term:

A ledger: If you go into antiquarian bookstores, you may have seen piles of books from the 19th century in which accountants entered transactions by hand. Those are ledgers. Ledgers are lists of transactions: items sold, and for how much; items purchased, and for how much. Those transactions are dated (timestamped) and ordered. Ledgers are strictly append-only: transactions can be added, but you can’t go back and edit or delete them. A blockchain can have ledger entries that are significantly more complex than credits and debits, but the concept is the same: a set of ordered entries to which new entries can be added, but old entries can be neither deleted or modified.

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