Blockchain

A blockchain, literally a chain of blocks, is a digital ledger in which transactions are recorded. The ledger is not held by one company or bank, but is maintained by many computers at once. Anyone can see which transfers have been made. Cryptocurrencies such as bitcoin and ether run on a blockchain.

You can compare it to a notebook that lies on the table of hundreds of people at the same time. If someone adds a line, everyone else gets that line too. Anyone who secretly wants to change an old line finds that all the other notebooks do not go along with it.

How does it work?

New transactions are collected in groups, the blocks. Each block contains a kind of fingerprint of the block before it. That is how they form a chain. If you change something in an old block, the fingerprint no longer matches, and all the following blocks no longer match either. As a result, changing anything afterwards is almost impossible.

The computers in the network jointly check whether a new transaction is valid before it goes into a block. There is no central administrator doing that. The addresses on a blockchain are public, but are not linked to a name.

Why it matters

Everything you put on it can be checked publicly, and that is useful when something goes wrong. In the hack of the crypto exchange Binance, about 6.3 billion dollars' worth of coins were siphoned off, according to the company, the biggest crypto theft ever. Because every transfer can be followed, researchers were able to trace the money immediately. Within a day almost half of it was frozen, roughly 3 billion, and Binance says it will compensate all losses (link). The issuers of some coins, the stablecoins, could block coins at certain addresses. Coins such as bitcoin and ether have no issuer and so cannot be frozen.

The weak spot here was not in the blockchain itself: according to Binance, the attack started at the laptop of a single employee.