Also Written as: ‘Block Chain’
What is a Blockchain?
A blockchain is an historical record of all the transactions which have ever taken place within a cryptocurrency network.
The term blockchain is derived from the two English words ‘block’ and ‘chain’. An individual ‘block’ refers to all of the transactions which have taken place within a fixed period of time. Each block contains information to identify its immediate predecessor, which therefore links all of the blocks together into a long ‘chain’ going back to the network’s very first transaction.
The system through which transactions are processed is called mining. Miners helps the network to reach agreement about how many coins each person has by processing transactions and confirming the validity of the transactions processed by others. Miners earn rewards for participating in this process, either through newly generated coins, transaction fees paid by others, or both. By performing whatever requirements are laid out by a particular cryptocurrency (depending on whether it is Proof of Work, Proof of Stake or something else) a miner earns a small change of mining a block.
Each block is usually fixed at a certain length of time. For example, Bitcoin uses 10 minute blocks. In Proof of Work systems the ‘mining difficulty’, which describes the probability of mining a block for each Proof of Work calculation, is algorithmically adjusted to so that the average time between blocks being found will always be 10 minutes, regardless of how much mining power is being used to look for them.
Alternatives Methods for Distributed Consensus Forming
A blockchain is not the only method for attaining distributed consensus between peers, although it is the most widely used and arguably the most highly regarded. An alternative method is to use a ‘distributed ledger’ (as used by Ripple) or a torrent-like system with DHT (as used by Maidsafe).