These days bitcoin is front-page news as its price’s vertiginous ups and downs elicit glee and despondency by turns among investors.
It was not always this way: the now-definitely-in-a-bubble cryptocurrency is making a comeback following years in which its association with crime and darknet drug markets kept it away from the spotlight.
During that period technologists and corporate evangelists had stopped touting the qualities of bitcoin – turning instead to a technology that underpinned the cryptocurrency without being tainted by dodgy connections: blockchain.
The blockchain was born as the digital scaffolding for cryptocurrency transactions. When devising bitcoin pseudonymous inventor Satoshi Nakamoto’s aim was to create a stateless virtual currency – not controlled by any bank or government.
But without any third-party acting as a guarantor how could you ensure users did not cheat and spend their immaterial coins more than once?
The solution was to entrust oversight to the whole network: all transactions are etched on a public log – the blockchain – maintained by a peer-to-peer swarm of computers (or ‘nodes’) – each holding an identical copy of the ledger.
When users spend their coins nodes take note and update the ledger.
The decentralised structure ensures that there is no single point of failure – making it nearly impossible to hack the network – forge transactions – or freeze them for legal purposes.