💎Part 2 of my cryptocurrency series. Follow and like for more tutorials:
In the last part I talked about the technology that allows for making transactions without needing to trust a third-party. Now I will talk about the system that allows us to do all that - the blockchain.
Simply put, a money transfer is just an entry in a register. Essentially we need a way to maintain that register ourselves instead of a third-party handling it.
There is a way! First, we need at least three people who will be using the system.
In the following example I will use 10 people as an example. They all agree that they will have each other’s accounts at all times but they won’t know the others’ identity.
Everyone holds a folder with pages in it that will form the register, which will track the transactions.
Next, everyone in the network sits with a blank page and a pen in their hands. Everyone is ready to write any transaction that occurs within the system.
Now, if #2
wants to send $10 to #9
To make the transaction, #2
shouts and tells everyone, “I want to transfer $10 to #9
. So, everyone, please make a note of it on your pages.” Everyone checks whether #2
has enough balance to transfer $10 to #9
. If she has enough balance, everyone then makes a note of the transaction on their blank pages.
As the time passes, more people in the network start transfering money to others. When they make a transaction, they announce it again.
If we assume that a page has ten slots for transactions, after they are filled everyone puts that page away and opens a new one.
Before putting the page away, we need to seal it with a unique key. By sealing it, we make sure that no one can ever make any changes to it after it’s put away. Moreover, if everyone trusts the seal, everyone trusts the contents of the page. And this sealing of the page is the crux of this method.
This sealing is called mining. I will explain mining in the next tutorial.
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