What is blockchain?

When it comes to cryptocurrency, the term blockchain is often used. Especially when Bitcoin is in the news again, the technology behind digital coins is mentioned again, but what is this technology and how does it work? Knowing what the blockchain does and how it works is information that is useful to know if you are looking to invest in cryptocurrency. As an investor, you might not get too carried away with this technology, but understanding how it works will help you understand why cryptocurrencies like Ethereum and Bitcoin are so popular.

Bitcoin and blockchain

According to the World Economic Forum, blockchain is seen as one of the technologies that can completely change the world. When it comes to blockchain, the term is often referred to at the same time as bitcoin. This is because the blockchain was specifically designed for Bitcoin adoption. The idea for Bitcoin was developed in 2008 by Satoshi Nakamoto. We don't know exactly who this person is, because it's a pseudonym. More than 10 years after the launch of this digital currency, we still don't know who the inventor is. It is mostly rumored that it was a group of four. On January 3, 2009, Bitcoin was launched as a global payment method without central bank intervention. Thus, users of the currency are responsible for control and the currency is not subject to inflation. Bitcoin also ensures that payments can be made very quickly, even between different countries. These fast payments are related to blockchain technology. This is one of the big advantages, but in reality the blockchain was designed to allow users to control all transactions made with bitcoins. There is no central bank to control everything.

There is no central bank with blockchain

With blockchain technology, there is no bank that can track all transactions. However, all users, of course, want everything to be safe and reliable. That's what blockchain is for. The blockchain is the ledger that contains all the transactions that have ever been made with bitcoins. Whether it's buying a pizza or investing a few tons, it's all on the list. The uniqueness of this list of blockchains is that it is publicly available. Any Bitcoin user can take a look at the blockchain. Thus, all users can check the transactions for authenticity and if everything is in order. You can now also view which Bitcoin transactions have taken place through the Blockchain Explorer Blockchain.com. Blockchain technology is also open source. This means that everyone can see how this technology is programmed and can and can make changes. This is also the reason that there are many other coins besides Bitcoin. These new coins often use the Bitcoin blockchain technology, but have then adapted the code to the system they think is better. This is allowed because it is an open source technology. It can seem intimidating that the system is so widely available. Everyone can see what is happening with transactions, and even the program code of the system. However, this openness is mostly about security. If there is a mistake in the code, it is immediately punished, often with a hack, as we sometimes see in the news. These errors make the system stronger and safer, so hacks are becoming less and less common.

How does my transaction get on the blockchain?

Now that you know what the blockchain is, the next question you may have is how all the transactions made with Bitcoin end up on the blockchain and how the control works. The blockchain is therefore a register containing all transactions. This is not a single registry, but there are many copies of the registry, all of which are updated at the same time when a transaction is made. These registers are in the hands of the users. Since everyone gets the same copy, no customizations can be made by a user. That will stand out. If not all copies match anymore, it is immediately clear that something is wrong. Committing fraud is therefore impossible. The system itself is actually quite simple, but very effective. When you make a transaction with Bitcoin, it is not first checked by a central bank, that is done in the blockchain. When you make a transaction, a block is created containing this transaction. This is the block in the name blockchain. All transactions and therefore blocks that are created are linked together as a chain. Once your block has been created, all blockchains will be updated in real time. If your transaction appears in all blockchain registries, the transaction has been approved and your cryptocurrency has been transferred. This entire process often takes less than 10 minutes with Bitcoin. There are even other cryptocurrency where it goes even faster.

• That check all transactions on the blockchain This is where the miners come into play. Miners provide computing power to the network to strengthen the network and to send and receive transactions. This is done with expensive equipment and usually consumes a lot of electricity. Green energy is widely used in countries with an energy surplus. Miners are paid in the form of a fee that is sent with a transaction. The more costs that are added to a transaction, the faster the transaction will be picked up and processed. Miners not only earn from the fees, but also receive a reward when they successfully find a block. At the moment, the block reward is 6.25 BTC and it has been halved in 2025 due to the Bitcoin halving.

Blockchain outside of the cryptocurrency

When you transfer money via Bitcoin, you do not send the money yourself, but you send a token. This is a line of text that allows your digital wallet to see how much Bitcoin to add to the other person's wallet. You do not send real money like with banks. Since only a token is used, this token can represent money as well as other things like a house or a product. There are already blockchain technologies where you as a user can verify the authenticity of a product. All transactions at Bitcoin are recorded in the blockchain, but you can also reserve a place in the blockchain for each product. As a consumer, you can then compare a product that you want to buy in this blockchain to see what the product is made of and whether it is not a fake product. Blockchain really functions as a registry where the users manage the content together. It doesn't have to be just a trade repository.