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Crypto-currencies, block chain and distributed ledgers.

Nigel Morris-Cotterill

This ultra-simplified explanation clarifies the absolute basics of a subject that has become shrouded in myth and mystery.

The blockchain, crypto-currencies (or cryptocurrencies) like bitcoin, distributed ledgers and smart contracts are, actually, stuff you already know..

The Ledger - Distributed

The blockchain is the technology that underpins the bit that actually does something. The bit that does something is the "ledger" and it's just the same as those dusty old books you see in old films of Dickens' novels where part of the story takes place in a solicitors' office. The medium of recording has changed but the principles go back to "tallies" which were strips of wood with notches cut into them by a "tallyman" to count sheep as they passed through a counting point. There are even older versions scratched into clay blocks from ancient Egypt.

Now imagine if, to ensure there was no fraud, both vendor and purchaser had their own tallyman counting sheep making sure that their numbers "tallied" and at the end of the day, each of them took their stick or lump of clay home. Neither of them could tamper with the results unless they both agreed. So, if there is one dead sheep the next morning, each of them might strike one from the total.

In principle, that's all there is to the "distributed ledger". It's multiple copies of the same data which (in theory) cannot be changed without multiple authorities.

If I sound cynical about security it's only because there has never been any form of security that has not, eventually, been broken and, as we have all read, there have been multiple instances of "stolen bitcoins," for example which, if those who say it's totally secure are to be believed, should be impossible.

So, the data in the blocks is the data which is in the distributed ledger and it's secured by cryptography.