A elementary guide to the blockchain and bitcoin
The blockchain is the future; it has the potential to convert everything from how we send money to how communities grow. Here is WIRED’s ordinary guide to the blockchain, bitcoin and how it could influence you.
I’ve never heard of the blockchain before. What exactly is it?
Uber's cheaper London rival has a entire heap of problems
If you’re not familiar with the blockchain, and it’s still a relatively fresh concept in the world of electronic finance, you no doubt will have heard of Bitcoin. Bitcoin is a peer-to-peer electronic cash system, also known as “cryptocurrency”, which basically permits people to make instant, anonymous transactions online.
However, Bitcoin records every single transaction made on its network in a public record. This is known as the “blockchain”.
Flying taxi startup Lilium nabs $90m investment boost
Bitcoins have to be “mined” using specialist mining software, which then carries out a series of intensive calculations to find a certain data sequence, or “block”. The block produces a specific data pattern when the Bitcoin “hash” algorithm is applied to the data. Whoever manages to do this will basically win bitcoins, which they can then spend in a range of places online and off.
So how often is the blockchain added to?
A fresh blockchain is generated around every ten minutes and then collective across the network. This means it’s permanently growing as finished “blocks” are made and added to the public ledger.
Silicon Valley is on a quest to grow the flawless diamond
How many “blocks” exist on the blockchain?
There is a uncountable number of blocks on the blockchain at any one time – as soon as one block gets ended, another is automatically generated.
So it’s a bit like the way conventional banks have a utter history of its customers’ transactions?
Exactly. All Bitcoin transactions are entered chronologically in a blockchain, similarly to how typical bank transactions are recorded. You can think of the different blocks, then, like individual bank statements.
The Indian startup modernising a 200-year-old industry
Can Bitcoin transactions be traced lightly on the blockchain?
Yes. All the blocks are added to the blockchain in a linear, sequential order. Each block contains a hash of the previous block, creating a linked series from the “genesis” block right the way through to the current one. As every Bitcoin user must have a Bitcoin address — a unique identifier that permits them to receive Bitcoins — the blockchain contains a finish set of information about every address using Bitcoin and their balances at any point in history.
So how do you keep track of all your bitcoins?
You’ll basically need something called a Bitcoin wallet: a free online wallet which you can use to make worldwide Bitcoin payments on your mobile or desktop.
China is overrun with unicorns
How can I get a Bitcoin wallet?
You’ll need to visit Blockchain.info to create your wallet. You’ll need to come in your email address and create a password, but it only takes a few seconds — and you can then send and receive Bitcoin payments instantaneously.
Does this mean the Bitcoin blockchain works like a bank then?
No. You’re essentially your “own” bank; you have finish ownership over your currency and only you can check your Bitcoin balance, view your transactions and make payments.
Bitcoin maintains that all transactions are secure because they can be tracked. However, this doesn’t tell the total story: there have been several cases where hackers have raided electronic wallets used to store secret keys that enable you to spend your bitcoins.
So albeit none of these stolen bitcoins can be spent, due to blockchain tracking, you can still be deserted of your capability to spend them in the very first place.
This feature was originally written ahead of WIRED Money 2015. Find out more about our events.