What is Blockchain?

The difference between traditional finance transactions and blockchain exchanges is sort of like the difference between a Microsoft Excel spreadsheet and a Google Sheets spreadsheet. You can send an Excel spreadsheet to a friend to make changes, but you have to wait until they save their work and send it back before you can make any more changes yourself. That's how banks move money right now: one bank locks access to the balance being transferred until the recipient bank confirms they've received it. All that coordination and synchronization takes a lot of time and effort.

On the contrary, if you want to edit a shared Google Sheets spreadsheet, both people have access at the same time and can always see the changes being made. Now just multiply that to many thousands of home computers, and you start to get a sense of what's known as the blockchain ledger. It's an open, distributed network of individual computers, or "nodes," that each hold bundles of records known as "blocks." Those blocks are visible everywhere on the network, but they're kept safe using a kind of math called cryptography. When someone requests a transaction, it's sent over the network where it's visible to all of the computers, which run a series of algorithms to "vote" on the authenticity of the transaction. Once it's confirmed, that transaction is combined with other transactions to create a new block for the ledger, making it permanent and unalterable. The fact that it's visible to every node makes it virtually impossible to cheat, too.

Mining:

There's one more important part to the blockchain: mining. It takes a lot of computing power to verify a transaction, so nodes in the network have to have an incentive to help out. Verifying a transaction involves shuffling through many blocks in the chain, which requires racing with other nodes to solve difficult computing problems. When one node beats the others to the solution, it's rewarded with digital coins. The owners of those nodes can use those coins in their own transactions, thereby putting more digital currency into circulation. As the value of Bitcoin and other cryptocurrencies continues to skyrocket, more and more entrepreneurs are opening "mines"