Without blockchain, bitcoin couldn’t exist. Here’s how it works

The world of cryptocurrencies is a complicated one. Although it’s become simpler to put money into it over the years, the underlying technology behind it all has only become more and more complicated. As hard as that makes it to get your head around though, as you’ll come to understand, that is actually a good thing.

Whether you’re simply looking to invest in bitcoin, trade some Ethereum, or are intrigued about what comes next for the blockchain, we’re going to help explain it to you. In this guide, we’ll help answer the core question at the heart of the cryptocurrency world: what is a blockchain?

The first work on the technology began back in the early ’90s in a paper entitled “How to Time-Stamp a Digital Document.” It was the very rudimentary idea of what the blockchain would eventually become, but it was the beginning of something that would spawn industries worth hundreds of billions of dollars and could very well reinvent many aspects of how our digital society operates.

Although you may associate blockchain technology specifically with cryptocurrencies like bitcoin, it’s just as related to cryptography as it is to digital currencies. Blockchains utilize the mathematical securing technique to legitimize a record, confirming its authenticity. The blockchain is a growing chain of these records, or “blocks,” that allows for a confirmed trail back to the original block that’s heavily resistant to modification and tampering.

That chain begins at the “genesis block,” the very first record in that chain and continues unbroken through successive blocks. Each of them is proven through the use of cryptographic hash pointers, which link it with the previous block in the chain and prove its validity. They also contain a timestamp and transaction data, thereby offering the same function as a traditional middle-man institution but with public rather than private oversight.

A more colloquial description of it is that it’s effectively a ledger that notes down the details of a transaction. What makes a blockchain different from more traditional ledgers is that it’s entirely peer-to-peer and therefore unbiased and requires the time investment of the community involved in its usage, rather than a dedicated middleman.

That’s what makes the blockchain such an effective backbone for cryptocurrencies, which is where it made its first practical appearance in the creation of bitcoin in 2009. Developed by the still effectively anonymous “Satoshi Nakamoto,” the cryptocurrency allowed for a method of conducting transactions, effectively acting like an entirely digital currency, but protected from interference by the use of the blockchain.

Although bitcoin and the alternative currencies all utilize blockchain technology, they do so in differing manners. Since bitcoin was first invented it has undergone a few changes at the behest of its core developers and the wider community, and other alt-coins have been created to improve upon bitcoin, operating in slightly different ways.

In the case of bitcoin, a new block in its blockchain is created roughly every ten minutes.