Blockchain: The Technology Behind Bitcoin

The Blockchain is a distributed database that manages all Bitcoin transactions and acts as a public ledger of all transactions in the Bitcoin network. You could think of it as a giant public spreadsheet. Blockchain also solves the “double spend problem“ that plagued previous digital currencies.

While Bitcoin offers a certain level of anonymity, it’s probably one of the most transparent financial systems that exists since all transactions are publicly logged in the Blockchain, yet the information used can’t identify anyone if set up correctly. Given that most people struggle setting up their digital recorders, it’s likely that the people who will avail of Bitcoin’s anonymity are not the people you’d like to get help from setting up your digital recorder.

A “bitcoin” is generated when computers running specialised software solve complex mathematical equations. This is called bitcoin mining. It was possible to mine for bitcoins on your home computer; today, you’d be competing with large-scale bitcoin mining farms in China that spend over $80K on electricity alone each month.

What’s interesting is the possibility of using the Blockchain for purposes beyond that of Bitcoin. Entrepreneurs are now turning their attention to outdated, back-office financial systems, and Blockchain-eqsue technology has the potential to revolutionise the payments industry—along with many other industries—given its secure, powerful, and decentralised architecture.

While no one can positively predict what the future holds for Bitcoin, two things are certain: the financial system is ripe for disruption, and digital currencies are here to stay. They might even transport old-school banks and malfunctioning governments into the 21st century.