When you hear the word “blockchain” you might immediately think of cryptocurrencies, but while it’s true they are linked, there is more to blockchain than digital money.
Blockchain is the technology behind online digital ledgers and it enables participants to access a permanent digital public record that can’t be altered. It’s made up of blocks of data that are chained together in chronological order. The attraction with a blockchain token is that each time it was involved in a transaction there’s a permanent record of that fact along with relevant details added to the ledger, so when it’s used as a type of cash you can think of it as “money that remembers where it’s been”.
Computer scientist Stuart Haber and physicist W. Scott Stornetta experimented with the first blockchain prototype in the early 1990s. They used it to secure digital documents so they couldn’t be altered. Their work inspired Dave Bayer and Hal Finney, along with other notable computer boffins and cryptographers, and the eventual result was bitcoin. This was the first decentralized electronic money transfer system. A white paper on the subject was published in 2008 by Satoshi Nakamoto, a pseudonym for someone whose real identity we still do not know to this day.
Although blockchain technology predates bitcoin, it’s the digital substrate on which most crypto networks still depend.Blockchain transactions take place across a peer-to-peer network of computers spread around the world. Each one of these nodes in the network looks after a copy of the blockchain and helps to run it securely. It’s this approach that makes bitcoin and other currencies like it so independent. There is no central bank where all the bitcoin is kept, so there’s no way that a corporation or government could ever stop it or control its use.
Blockchain is set up in such a way that defrauding someone becomes virtually impossible. As a shared database you would need to be able to somehow change every copy of the ledger, and this just isn’t feasible in terms of either the practicality or the energy and computing muscle required to achieve it. To all intents and purposes, you just can’t hack the blockchain.
Bitcoin operates using something called the proof of work consensus algorithm (which is at the heart of the bitcoin mining process). This enables it to be realized as a “Byzantine fault tolerance system”, which is another way of saying that its blockchain can work without interruption as a distinct network, and even if some of the nodes in its network can’t be entirely trusted, the network as a whole can.
Blockchain technology can also be used in areas where the integrity of data is important, and lately, it’s found its way into the art realm. Non-fungible tokens (NFTs) using blockchain technology make it possible for artists to create verifiably unique and genuine works of art. But the integrity of blockchain means that it can be used in virtually any industry.