Blockchains are distributed computer networks that support cryptocurrencies. They are huge, immutable financial ledgers that record transfers from one cryptocurrency wallet to another, or interactions between a cryptocurrency wallet and a cryptocurrency protocol.
Blockchains add entries to ledgers in batches, which are called blocks. A block can never be removed. Most blockchains are public—you can see a long list of all Bitcoin transactions ever processed, for instance, on a so-called “explorer” like this one.
While conventional databases limit access to who’s allowed to add transactions to the database, most blockchains ask a decentralized network of computers to fight it out and win the right to add blocks to the ledger.
The first blockchain, Bitcoin, came up with a competition called proof of work. This grants the computer the right to process—or “mine”—a block when it’s the first to solve a complicated math puzzle. The most popular alternative, recently adopted by Ethereum, lets those who hold the most coins validate transactions—a proof-of-stake model.
The degree of decentralization varies across blockchains. Some permit only a select few computers, such as those run by large companies, to validate transactions. Others, like Bitcoin, allow anyone to compete to add blocks to the ledger in exchange for a reward.
Community blockchain development is often, but not always, decentralized. If a group of contributors disagrees over the future of the network, they can “hard fork” the code to create another version of the network that contains their tweaks, and bring along miners or stakers that support them. This occurred in 2016 when the Ethereum blockchain forked into two networks, Ethereum and Ethereum Classic, which are governed by separate rules.
The challenge for decentralized blockchains is that they are relatively slow and expensive, while more centralized ones operate more efficiently—but are vulnerable to manipulation. Not everything requires a blockchain and, in some cases, firms launch dodgy blockchain projects to cash in on hype. Other blockchains, like Bitcoin, have stood the test of time and are more reliable than ever.
Go deeper:
Bitcoin white paper—Satoshi Nakamoto (Bitcoin founder)
How does Ethereum work, anyway?—Preethi Kasireddy (a blockchain developer)
See also:
What Is Ethereum?
What is cryptocurrency?
Try it:
Blockchain.com—a blockchain explorer