The Bitcoin Blockchain Explained
Bitcoin is the world’s first and most popular digital currency. It is decentralized and controlled by no one. How does it work, and why can you trust it? After all, if computers can copy any file, why can’t I just make copies of my bitcoins? And if it is not controlled by any one central party, what prevents me from making forging transactions for bitcoins I don’t own? This article will explain in layman’s terms how Bitcoin works and provide information on how the technology backing Bitcoin can be used for business use cases beyond simply a digital currency.
Bitcoin works by solving three record-keeping challenges without the need for a central record keeper like a bank:
- Proving ownership of bitcoins.
- Preventing tampering with records of past transaction.
- Providing an authoritative ledger of transactions that is trustworthy.
Challenge #1: Proving Ownership
The first challenge for Bitcoin is proving ownership. When the owner of a bitcoin publishes a transaction to the network, how do we know that it actually came from that bitcoin’s owner and not an imposter? The answer to this lies in computer encryption.
