A blockchain is a decentralized, censorship-resistant database. Traditional database records are being kept on one server. Blockchain records are kept on thousands of computers which makes it close to impossible to manipulate them. The technology behind it was proposed by the mysterious Satoshi Nakamoto. In 2008 Satoshi published the Bitcoin whitepaper and in January 2009 mined the first couple of Bitcoin blocks, which marks the beginning of today’s most famous blockchain.
Satoshi solved an important technical question with Bitcoin. In computer science, it is being referred to the Byzantine generals problem. Satoshi found a way for thousands of decentralized participants to create consensus without a centralized entity confirming the validity of the consensus.
This is done through the process of mining. Every time a new transaction happens, miners race to encrypt the transaction details to validify the transaction. Thereby the miner transforms the transaction information into a string of characters. The miner’s goal is to create a string with as many zeros as possible. Once a miner has created such a string the miner broadcasts it to the rest of the network. Now the network decrypts the encrypted information, by taking the string apart and thereby confirming the transaction information.
As a reward, the miner automatically receives crypto coins. Then the game starts again from the beginning and the next block is being mined. In the next block, a reference to the previous block is included and thereby chaining the blocks to each other.