Blockchain is a technology that has sprung into popularity in the last decade alongside the rise of cryptocurrencies and other digital assets. A blockchain, as the name suggests, is a continuous list of blocks of information that live on a network of computers. New blocks are added to the list by some of the computers on a periodic basis, and the other computers verify the same using special algorithms.

The key attribute of blockchains is that they are decentralized, meaning no one computer or actor can modify the record of events stored in the “chain.” This gives them strong security guarantees, allowing an immutable record to be maintained across the entire network. These systems are built not to rely on a single authority, and instead work by sharing responsibility across a wide group of smaller participants.

Blockchains are particularly useful to form the basis of digital money, as they help create and maintain scarce virtual assets. This is in stark contrast to the typical understanding of digital data, where making copies of things is an easy task.

This characteristic of immutability makes blockchains a highly suitable technology for financial applications, enabling the creation of scarce digital assets.

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