What is the Blockchain? Explaining the Tech Behind Cryptocurrencies

A blockchain is a relatively new kind of database that has become the trendy solution for storing digital information more securely. The International Data Corporation recently forecast that companies and governments will spend $2.1 billion on blockchains in 2018, more than double what was spent last year.

But if you ask even the people who work with blockchains to define the technology, you are likely to get a stuttering response.

Don’t blockchains have something to do with Bitcoin?

Indeed. The first blockchain was the database on which every Bitcoin transaction was stored. Since Bitcoin began in 2009, the blockchain has come to hold over 160 gigabytes worth of data about every time a Bitcoin is sent between two digital wallets.

Why is it called a blockchain?

In the original documents describing Bitcoin, the virtual currency’s new database was not referred to as a blockchain. But it got that name over time because all of the transactions coming onto the network were grouped into blocks of data and then chained together using sophisticated math. That makes it hard to go back and rewrite or monkey with the older records. Academics have pointed out that this design existed before Bitcoin, but Bitcoin brought it to prominence.

How is the blockchain different than other databases used to store transactions?

Most databases used to keep financial records are maintained by a central institution. JPMorgan Chase, for instance, is responsible for keeping track of how much money is in all of its customers’ accounts. With Bitcoin’s blockchain database, the ledger is kept and updated communally by all the computers that are hooked into the Bitcoin network. The communally maintained nature of the Bitcoin blockchain has brought it comparisons with Wikipedia, which relies on a broad network of contributors rather than one author.