National Bank of Ukraine Weighs in on the Legality of Bitcoin
Since you’re reading this article, you definitely have interest in cryptocurrency and its underlying technology. You should have at least heard the word ‘blockchain’ thrown around in conversations surrounding the topic, but do you actually know what it means?
The easiest way to wrap your head around the concept of the blockchain is to view it as a ledger. That’s what it essentially is – a giant ledger that holds the records of all the operations in the system. This database is also completely public and accessible to anyone who is interested in the matter.
Turns out, all we need in order to transfer money around the globe is the information about the transaction to be entered into a specific register. Currently, that register is handled by the third parties (like banks and other financial institutions), which is not ideal for a number of reasons. Essentially, you entrust your identity and financial security to someone else.
Blockchain is the best way to avoid that.
In it, every transaction is recorded by every member of the community, making the resulting ledger completely transparent. Simple enough, right? But wait, that’s not the main draw of the technology. Every now and again, all the available records are compared, and they should be absolutely identical. No inconsistencies are tolerated. After that, the information is encrypted with the help of a hash function. This makes the data extremely hard to decode. Then, the data is sealed in a block. And after it is sleaed, the idea is to never alter it in any way.
This creates a permanent public record, available to all participants and completely decentralized at the same time. These blocks stack and, in turn, create something we call the blockchain.