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Discussion on: Explain "BlockChain" like i am five

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Nested Software • Edited

Let's say we're talking about bitcoin, though the general idea is similar across blockchain systems. If you send me a bitcoin, that transaction will be added to a group of transactions called a block. When a block is full of transactions, it is added to the chain. The blockchain is a list, or chain, with all of the trades of bitcoin ever made stored on it.

The tricky part is this: The blockchain is not managed by any one person or organization - it operates by consensus. Every node has its own copy of the blockchain and decides whether a given block should be added to it. New blocks are propagated from one node to its peers, and then to the peers of those peers, and so on. Nodes accept the longest blockchain as the one that is valid, because It's very hard to make the blockchain longer. As a result, if you have a lot of computing power, you're probably better off using it to make money by legitimately extending the blockchain than by trying to get away with some form of fraud.

Note: Bitcoin uses "proof of work". The idea is that it is very hard (requires a lot of computing power) to create a new valid block, but it is easy for a peer to check whether a block is valid or not. There is also the idea of using "proof of stake" instead. I believe Ethereum are planning to switch to this newer system in order to cut down on the computing resources required to manage the blockchain. It is trickier to make sure proof of stake won't be abused though.

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