Definition Edit

A block-chain is a shared public database in which all Bitcoin transactions are recorded.[1]

Overview Edit

Block chain algorithms enable Bitcoin transactions to be aggregated in 'blocks' and these are added to a 'chain' of existing blocks using a cryptographic signature. The Bitcoin ledger is constructed in a distributed and 'permissionless' fashion, so that anyone can add a block of transactions if they can solve a new cryptographic puzzle to add each new block. The incentive for doing this is that there is currently a reward in the form of twenty five Bitcoins awarded to the solver of the puzzle for each 'block'. Anyone with access to the internet and the computing power to solve the cryptographic puzzles can add to the ledger and they are known as 'Bitcoin miners'. The mining analogy is apt because the process of mining Bitcoin is energy intensive as it requires very large computing power. It has been estimated that the energy requirements to run Bitcoin are in excess of 1GW and may be comparable to the electricity usage of Ireland.

Bitcoin is an online equivalent of cash.

[T]he basic block chain approach can be modified to incorporate rules, smart contracts, digital signatures and an array of other new tools.

References Edit

  1. Revenue and Customs Brief 9 (2014): Bitcoin and other Cryptocurrencies, at 1.

Source Edit

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