Blockchain Explained
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.
That sounds confusing, so let's try and make it less so.
You (a node) want to send your friend (another node) payment, in Bitcoin, for your share of last night's dinner tab. You each have a matching file on your computers (ledger). Importantly, ten accountants (miners) have a matching copy of the file on their computers also (distributed). You don't know them, and they don't know you, except as an anonymous string of numbers and letters.
As you click return on your keyboard to send the Bitcoin to your friend, an alert is sent out to all the accountants. They immediately rush to be the first to confirm that you have enough in your account to pay your friend. They do this because the first one to confirm this accurately will get paid a small amount of Bitcoin from a pool of Bitcoin set aside for this purpose. When they believe they have confirmed the transaction they announce this to the other accountants, along with their logic for doing so (proof of work). If the other accountants agree, they click send. The bitcoin is transferred to your friend, the accountant is paid, and everyone's ledger is updated simultaneously (duplicated).
Less confusing, right? That's really the gist of it. You can dive deeper if you like, but if you can understand this transaction, you can understand blockchain technology.
We'll define a few of the key terms below. Crypto language, like trading language, will make more and more sense the more you read and use it, similar to any foreign language. With just a few of the basic terms, generally understood, you'll be able to speak the language conversationally. Actually becoming fluent in the language, like a developer or miner would, will take a bit more practice.
- Blockchain — The blockchain is Bitcoin’s accounting ledger. It is a public record, downloadable by anyone. The Blockchain stores an infinite amount of transactions.
- Node — A server or storage device which stores the entire Blockchain.
- Mining — the process by which Bitcoin miners validate transactions.
- Bitcoin wallet address — Equivalent to your bank account number. Bitcoins are stored against this address/ID. Each wallet address is associated with two unique keys, called public and private keys. A transaction requires both.
- Public and Private key — The public key is used to send Bitcoins to you, and can be seen by anyone. The private key is your password, and you need it to spend your Bitcoin.
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I've been trading and traveling my entire adult life. I'm currently trading from my boat in the Caribbean. Over the years this has gotten easier and easier to do. Drop the anchor, tether your phone to your laptop, browse some charts, and trade. At Wanderer we first began investing in Bitcoin in 2017 when it was worth $2,500. Fortunately, we recognized its potential, unfortunately, we didn't realize it even earlier. Today it is worth about $50,000, and we believe it is here to stay. Bitcoin will have its ups and downs along the way, but years from now we expect it will be much higher, and we'll still be bopping around in the islands.
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