Blockchain is a system of recording transactions in many
databases that are widespread on many computers, each of which contains
identical records. This system is also known as distributed ledger . With
this decentralized transaction record, it is almost impossible to hack or
change unilaterally, without changing the majority of all databases.
Note these transactions are contained in blocks that are
interconnected. If one block is full, the next block will be connected to the previous block. Transaction
records that are contained in blocks that have been created, cannot be changed anymore – so the blockchain is
often referred to as having immutable properties.
Comparison of Traditional
Systems with Blockchain
sure you can find many definitions of blockchain on the internet, so I will try
to explain the meaning in my own way. Let’s compare the traditional system
with the blockchain system.
System: Trust With Third Parties
Suppose you buy a cup of coffee at your favorite café at the
Mall. When you pay, you swipe your credit card at the café card machine. Here
happens a transfer of money from your account to the café account earlier. But
how do you know that this transfer actually happened? Why does your café
believe that your money has been transferred to their account? This is
because there are third parties that are trusted by you and your café. In
this case, the third party is your bank, or the card network that you use
(Visa, MasterCard, or Amreican Express). Your café trusts third parties. But what will happen if your bank
system, or your credit card network experiences technical problems or for
example being hacked?
2. Blockchain System
Blockchain is a system that does not use these third parties. In
essence, records of transactions that have occurred, are stored by many
computers that are spread on the network itself. So it will be more
difficult to hack a system of hundreds or thousands of computers, and it is
unlikely that all of those computers will crash at the same time.
So, for example if you pay for your coffee using Bitcoin (a
cryptocurrency), the Bitcoin for coffee payments is transferred from your
Bitcoin address to your Bitcoin cafe address on a peer-to-peer basis. And
this transaction will be recorded on all computers spread over the
The Characteristics of Blockchain that are important to be
understood by Cryptocurrency investors
If you have read and understood the concept of
blockchain in general above, here is a further explanation of blockchain from
the cryptocurrency investor side.
1. Open-source and Transparent
2. Decentralized/Not Centralized
Supply and Inflation Level Are Clear (Data Available)