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So, what's this blockchain thingy? - a World Money Laundering Report exclusive (part 2)

Blockchains are not only for currencies.

One way of looking at blockchains is that they are networks within networks.

A node is simply a point at which information is stored and/or processed. And a node can be anywhere that the internet reaches, directly or indirectly.

Blockchains are not only for currencies.

There is a widespread feeling that blockchains are only useful for currencies like BitCoin. That is not so but because of that misunderstanding, it's easiest to explain blockchain by referencing it to banks.

A bank is, at its most basic, nothing more than a secure warehouse for other people's money and recording the amount stored. The word "deposit" means something left somewhere.

A more complex bank provides a service of transferring amounts from one depositor (A) to another (B) and recording that transfer by adjusting the balances held and keeping a note of where the money came from and went to.

That is pretty much all that electronic payments systems do - everything else is bells and whistles and compliance or risk management.

And, despite what some people say, that's exactly what the bitcoin and other blockchains do, but they do it more like the alcane than like the explosive in the images above. However, the way in which they do it is fundamentally different.

They provide a "distributed" repository of information (often called "data") that is stored on nodes that are attached to the internet. Because the internet is made up of highways and by-ways, the routes to those nodes are many and varied and do not require a hub. Here's the clever part: every node contains every record and, (here's the "how it works" bit you don't need to know) every time there is a transaction, every node is updated.


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Part 2:

Part 3:

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