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N00bs’ guide to blockchain

N00bs’ guide to blockchain

For beginners

It powers bitcoin and all crypto. Everyone talks about it but no one really knows what it is.

 

What’s a blockchain?

A blockchain is a database. Basically, it’s not so very different from a filing cabinet or a filofax, except that it’s very popular and filofaxes went out of fashion after the 1980s, like mullets and shoulder pads. It’s a way of writing stuff down and finding it again later when you want it.

 

Is it more complicated than that?

No, that’s it.

 

Seriously?

Ok, it is a little more complicated. It’s like a filofax where anyone can add an entry and nothing can be changed afterwards. Once something has been written into it, it cannot be removed or altered.

 

Anyone can use it?

Yes. It’s not like Facebook or Amazon, where the evil company decides who uses it and can alter or close your account. It’s ‘open’. There are no restrictions on who gets to write in the filofax.

 

So if no one’s in charge, how do you stop people giving themselves other people’s money?

To add an entry to the blockchain, you have to know the private key for that account. It’s like a really long password. Without it, you can’t move money. It’s a bit like signing an entry in the filofax. If the signature is wrong, everyone will know it’s a fake and will ignore it. Except the private key is a lot more secure than a signature.

 

How do you stop people sending the same money twice?

Everyone has a copy of the filofax. If Bernie Madoff has 1 bitcoin and tries to send 10, he can make a transaction because he does have the right private key (signature). But everyone will check their copies and know he is lying and doesn’t actually have that much money to transfer. So they will ignore all the bad transactions.

 

So I have to keep my private key very safe?

Yes. If you lose your key, you can’t get into that address and any funds in it (like losing the key to your house). And if someone else steals your key, they can get into your address and everything in it. So you have to store your private key very securely.

 

How do I create an address on the blockchain?

It’s easy. Because it’s open, you don’t need permission from some Evil Company. You don’t even need an email address. You can download wallet software for each blockchain (let’s just say Bitcoin to keep it simple for now). The wallet creates new private keys, which are just long strings of random characters, which allow you to access the address that is linked to each of them. It stores the keys safely, and it lets you make transactions for those addresses using those keys.

 

Is blockchain better than a filofax? Or a normal database?

Blockchain is better than filofaxes, unless you also like cassette tapes and Big Hair. It’s not exactly better or worse than a normal database, just different. It works well for some things, not others. It gives control back to the user, so you don’t have to trust Facebook or your bank to let you use it, and not to tamper with it. That’s good when it comes to money, since most big corporations like money and will do anything to get more of it.

 

Are there places I can find out more?

Yes, of course.

 

Where are they?

The internet. Try Googling it.

 

You’re not being very helpful

Fine. Try this video: https://www.youtube.com/watch?v=SzAuB2FG79A. It has a penguin in it and everything.

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