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Cryptocurrencies: The concept of blockchain

October 6, 2019

In today’s article, we will dig right into the idea of blockchain. Whenever it comes to crypto or bitcoin, we talk about blockchain. So, one may wonder what a blockchain is. You’ll get a brief idea about blockchain here, and also click here for more information about trustedbrokerz . Now, Without further ado, let’s jump into it.

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A blockchain is, in layman’s term, a ledger. Most of us know what a ledger is without even having ever interacted with one directly. Let me ask one question here, from where do you think a bank makes its money? A lot of Americans use bank every single day, but most people don’t really know how a bank makes money. There can be many things like lending, investing, etc. But the actual answer is far simpler – they maintain a ledger. And they make money to maintain that ledger. Let me explain it.

A bank has many ledgers, a ledger with your account, a ledger with my account, and a ledger with every single person, or more specifically, with every single client of theirs. This ledger has a series of credits and debits. Let’s say there are two persons, David and Angela, and they both have accounts with a bank. Now, if David wants to send a ten dollar to Angela, the bank goes into David’s ledger, and they see that David has got a hundred dollar in his account. So, they do a debit of ten-dollar from David’s account and subtract that amount from David’s ledger. At the same time, they do a credit of ten-dollar to Angel’s ledger, and her account gets that amount. It’s that simple, and that’s what they do for you, for me, for companies, and for countries. These banks just maintain Ledgers,  and they get paid a lot of money to maintain these Ledgers. That’s how a bank makes money, every other thing like lending, borrowing, investing, etc. are just part of this ledger maintenance. And they charge this money from us, the clients. This is the money that we don’t often think about, like wiring fees, credit card fees, ATM fees, etc. They take your money on that ledger, they lend it to other people, and they make interest on it – that’s basically what a bank does. They actually make a lot of money for maintaining this ledger as a service for us and that’s what called a centralized ledger.

A blockchain is just a ledger, but there’s a very crucial difference between what a bank is doing and what Satoshi Nakamoto, who is the founder of Bitcoin, decided to do. He thought, let’s take that same ledger that bank has and let’s give one copy of that ledger to everyone. One to David, one to Angela, and one to every single person who’s operating on this network (we call them miners). Every single person will see this ledger, and now if you want to do that same transaction, the ledger will be maintained by everyone involved in the blockchain network. This time, if David wants to send Angela one bitcoin – the blockchain will see if David has enough Bitcoin in his wallet. Then the network will debit one bitcoin from David’s account (provided it has enough balance), and credit to Angela. Now there are obviously additional layers of encryption, security costs, and transaction cost, but what blockchain is a decentralized ledger for cryptocurrencies mainly.