Cryptocurrency Ledger Technology
Whether you have had dealings with cryptocurrencies in the past or not, the fact of the matter is that if you ever want to deal with cryptocurrencies, the concept of a public ledger, or blockchain, is something you must fully comprehend. Originally, this technology was harnessed and publicized by the person or persons known as Satoshi Nakamoto in his, hers, or their creation of Bitcoin, the world’s most famous cryptocurrency. Since the dawn of Bitcoin, however, the idea that is cryptocurrency ledger technology has really taken on a life of its own.
Cryptocurrency Ledger Technology Explained in Terms of Google Docs
A blockchain, or public ledger, is a mechanism that allows information to be globally distributed, but never copied. In many ways, you can think of how ledger technology transformed the world by looking at Google Docs vs. traditional Microsoft Office programs.
In the past, any sort of collaborative work that would be done on Word or Excel needed to be saved, attached to an email, and sent in order to be reviewed and revised by other people. While this was all fine and good, the process was cumbersome because as soon as the changes were made, the file needed to be resaved, reattached, and resent for further review and revision.
For massive projects with hundreds of spreadsheets and documents, as well as hundreds of end-users that needed to review the spreadsheets and documents, the process of constantly attaching and sending can become convoluted and confusing, at the very least. Google Docs, however, steps in and allows people to work collaboratively, but in a much more streamlined way. With Google Docs, the aforementioned spreadsheets and documents sit on a shared ledger accessible by you and anyone else who is working on the project. Edits and revisions happen and are saved in real time such that the second I make an edit on my computer, you will be able to see it on yours. No longer do I have to attach to an email and send, because everyone has access to the same G Drive, or ledger.
But What’s the Point
Apart from just being easier for the end-user, cryptocurrency ledger technology has all sorts of other benefits. From this point forward, we will move on from the Google Docs comparison, to how cryptocurrency ledger technology functions within the cryptocurrency world. For simplicity, we will speak in terms of the cryptocurrency Bitcoin.
Safety and Security
When it comes to Bitcoin, the distributed ledger is necessary to uphold the transparency of the network, but it also has some built-in safety features as well. All of the information on the Bitcoin ledger, the blockchain containing every transaction ever conducted, is distributed equally across the network of computing power. Because of this even distribution, there can never be a single entity controlling the entire network, and there can never be a single entity capable of taking the network offline.
To go back to the Word Doc analogy, if I have an all-important Word document on my computer and that computer is destroyed, the Word document is too. Just like, if Bank of America’s network of servers (the single entity) crashes, anyone with a BoA account will be left with nothing. When it comes to Bitcoin, however, the distributed nature of the network means that even if one or two computing entities go bust, there are literally millions of others still operating, keeping the network afloat.
If you were a hacker trying to steal bitcoins, knowing where to start would probably be nearly impossible because the information on even a single user is spread across millions of computers. Conversely, a hacker knows that a bank like Bank of America has a farm of servers, a centralized location where all customer data is stored and ready to be taken. By successfully hacking that server farm, a single hacker would be able to lay claim to the personal information of millions of people. This is something that could never happen with Bitcoin, because there is no one, single entity tasked with storing all of the information. Instead, it is stored on the ledger.
Since Bitcoin was first created back in 2008, the distributed ledger upon which it runs has never failed. Sure, there have been attacks and other attempts to otherwise distort and pervert the network, but the distributed nature of all the information on the Bitcoin network means that even a handful of unscrupulous characters are, quite literally, incapable of bringing the network down.
As was briefly touched upon above, the transparency of it all is another reason why cryptocurrency ledger technology is such a modern marvel. To go back to our running analogy, if I were to be making edits to a collaborative Word document, no one in my collaborative group would be able to see the edits I made until I boxed them up in an email and sent them. With Google Docs (public ledger technology), the edits I make are visible right away and to anyone in the network.
With regard to Bitcoin, this type of transparency means that anyone can verify the total number of Bitcoins in circulation at any point in time. Why is this important? It is important because the ability to verify the total number of bitcoins ensures that there can never be a scenario where someone is sitting back and creating bitcoins on their own computer and giving them to themselves.
The one-two punch of safety and transparency is what makes cryptocurrency ledger technology truly remarkable. It may seem a bit scary that the ledger is, in fact, public and able to be viewed by anyone, the distributed nature of all the information should give you the peace of mind that information cannot be stolen or replicated. This is how you are able to see every Bitcoin transaction that has ever taken place, but are unable to see who it was that was involved in each of those transactions. The transactions themselves are stored on the public ledger, and the personal information is encrypted and spread across the entirety of the network, making it impossible to steal.