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Blockchain Basics – A Guide for Ordinary People

You might be apprehensive if you have tried to dive into blockchain technology. Let’s start with what blockchain really is. You can see MetaEdge content for more information.

A blockchain is simply a digital ledger for transactions. The concept of a Blockchain can be summarized as follows: It’s a ledger which records sales and purchases, much like the ones we used for hundreds of year. Although it functions almost exactly the same as a traditional ledger, this digital one records both debits, and credits. This is the main concept of blockchain. It is only who manages the ledger that differs from who is responsible for verifying transactions.

Transactions are traditional in that the recipient of a payment must be able to transfer it to their beneficiary. Let’s imagine Rob wants to make a payment to Melanie. To transfer PS20 to Melanie, he has two choices. One is to cash the note in PS20 form or use a bank app. Banks are the ones verifying both the cash transfer and Rob’s money are validated when Rob withdraws the money from the ATM. The app also verifies Rob’s funds when he does the digital transfer. The bank will decide if the transaction should be processed. Rob has a complete record of his transactions. It is the sole responsibility to update this information whenever Rob makes a payment or receives funds. The bank is responsible for the management of the ledger and all transactions are processed through it.

Rob will have to take on a lot of responsibility. Rob should feel safe in the bank. He must have confidence that his bank will not cheat him, not lose any of it, not rob it, not vanish overnight. Trust has been the cornerstone of virtually every behavior and aspect of the monolithic financing industry. The government (another intermediary) decided to bail out banks instead of risking losing the last bits of trust that would be lost if they collapsed.

Blockchains work in a different way. They are completely decentralised. The blockchain is completely decentralised. It does not contain a central clearinghouse or central ledger. Instead, the ledger’s information is distributed to a network of computers. These nodes each hold a copy the entire ledger from their own hard drives. Each node is connected with another node via software called a Peer-to/P2P Client. This client syncs data across all nodes, and guarantees that each node has the same version.