What is the blockchain and its relationship to cryptocurrencies?

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Blockchain is a decentralised database that records information using a peer-to-peer protocol, which makes it difficult or impossible to change, hack or cheat the system. It’s essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Each block in the chain contains a number of transactions and every time a new transaction occurs, a record of that transaction is added to every participant’s ledger. This data is verified by the community and the validations performed by the computational sums determine the issuance and or reward of a cryptocurrency like Bitcoin.

Blockchain underpins the authenticity of digital assets like Bitcoin and disruptive technologies like DeFi (Decentralised Finance). All cryptocurrencies are powered by blockchain technology.

The decentralised database is managed by multiple participants and is known as distributed ledger technology (DLT) where transactions are recorded with an immutable cryptographic signature called a hash. In simple terms, the blockchain can be described as a data structure that holds transactional records and ensures security, transparency and decentralisation. You can also think of it as a chain of records stored in the forms of blocks, which are not controlled by a single authority, hence the peer-to-peer community.

The blockchains that support Bitcoin and Ethereum are constantly growing as blocks are added to the chain, which significantly adds to the security of the ledger. Participants are attracted to the networks for several reasons, such as to mine  cryptocurrencies, which involves verifying transactions recorded in the ledger to generate Bitcoins or to develop disruptive services made possible by smart contracts and decentralised finance (DeFi). Think of banking, investing, lending, remittance, insurance to name just a few and how a peer-to-peer community is cutting out the middle men in the traditional financial world, increasing efficiency and reducing costs, all thanks to blockchain technology.

Article written by Andrew Ludwig https://www.linkedin.com/in/andrewjohnludwig/ , Head of Distribution @ CURRENCY HUB https://currencyhub.co.za/and founder of BLACK ONYX https://blackonyx.co.za/ and FUND HUB https://fundhub.co.za/.

Disclaimer: This article does not constitute financial advice. While the author and his firms are regulated by the FSCA, cryptocurrencies are not a regulated investment.  Please refer to CURRENCY HUB https://currencyhub.co.za/ a juristic representative of BLACK ONYX (FSP 47701) https://blackonyx.co.za/ for more information.