How the Technology Works
What is a blockchain and how does it work?
A blockchain is a shared record of transactions that is stored across thousands of computers around the world. Instead of one company or institution keeping track of who owns what, a blockchain lets everyone see the same record at the same time. Once something is recorded on a blockchain, it cannot be changed or deleted.
How does it work?
Think of a blockchain like a notebook that everyone in a room can see. Every time someone sends money to someone else, a new line is written in the notebook. Everyone in the room can read it. Nobody can erase a line or change what was written. And nobody owns the notebook. It belongs to the room.
In practice, the "room" is a network of thousands of computers spread around the world. Each computer holds a copy of the same record. When a new transaction happens, the computers in the network follow a set of rules to agree on which transactions are valid, then add them to the record. Because so many independent computers hold the same copy, no single person, company, or government can alter it.
Why does this matter?
Traditional financial systems rely on a central authority to keep records. Your bank keeps track of your balance. A payment company keeps track of your transactions. You trust them to keep accurate records and not to change them. If their system goes down, or if they make an error, or if they decide to restrict your access, there is not much you can do.
A blockchain removes that dependence on a single authority. The record is public, distributed, and permanent. No one needs to approve a transaction for it to go through. This is what makes it possible for stablecoins to move between people without needing a bank or any intermediary to process or approve the transfer. This concept of removing central control is called decentralization.
Are there different blockchains?
Yes. Bitcoin, launched in 2009, was the first blockchain. It was designed primarily for sending and receiving Bitcoin. Ethereum, launched in 2015, expanded what blockchains could do by allowing developers to build applications on top of it. Since then, many other blockchains have been built, including Base, which was built by Coinbase. Each blockchain has different strengths. Some are faster. Some are cheaper to use. Some are designed for specific purposes.
Stablecoins like USDC are available on several different blockchains, so users and applications can choose the one that works best for them.
Is a blockchain the same as crypto?
No. A blockchain is the technology. Cryptocurrencies and stablecoins are currencies that are built on top of that technology. It is similar to how the internet is a technology, and email and websites are services built on top of it.
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