At its core, the blockchain is a distributed ledger. But what does that mean? And how is it different from a centralized ledger? What exactly is a blockchain?<\/p>\n
We will explain it by comparing a blockchain with a bank.<\/strong><\/p>\n Your bank maintains a central database, that is, a “ledger”, of all your customer data. This can store account numbers, balances, transactions, and more. Every time you interact with your account, for example, withdrawing money or making a transfer to another person or entity, your bank updates the records.<\/p>\n Only the bank has access to the ledger, so if they decide to make a change, there isn’t much the user can do about it.<\/p>\n Now imagine that a hacker had access to this database. They could modify balances, delete operations, and much more. Your bank may be able to restore data from backups, and there may be many databases that serve this data, but ultimately it is controlled by a central entity.<\/p>\n Distributed ledgers are much smarter. Instead of one person or company is solely responsible for the general ledger, many people have copies of a distributed general ledger, and there are often few restrictions on who can join.<\/p>\n Each user, known as a “node,” stores a copy of the data, from the beginning of the book to the present. The whole lot. For each transaction, multiple nodes verify it, and then all nodes update their records so that everything is kept up to date and in sync.<\/p>\n Each new transaction is grouped with many other transactions in a “block”. These blocks provide some benefits. There is no centralized authority that can manipulate the registry. If a nefarious hacker or node started changing records in a workbook, all other nodes would reject it as the new records would not match the data stored by everyone else.<\/p>\n The only way to manipulate the data is for each node to conspire against each other, which is highly unlikely. In the case of Bitcoin, there are approximately 10,000 different Bitcoin nodes scattered around the world at the time of this writing.<\/p>\n Table of Contents<\/p>\n