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WIRED Explains: Understanding the Blockchain

by Michael Stark

**Blockchain: The Tech Buzzword of the Moment**

*By Jessica Smith*

You might be noticing the word “blockchain” popping up a lot lately. From startups to established companies, it seems like blockchain is the new “it” technology. But what exactly is blockchain, and why is it creating such a buzz?

### What is Blockchain?

In one sentence, blockchain is a way of storing and processing sensitive information such as financial transactions or voting records on numerous different computers, rather than in one central location.

### The Importance of Blockchain

The key to understanding the importance of blockchain lies in the concept of trust. Think about elections. Typically, the process of running an election, receiving and counting votes is managed by a single organization. However, this centralized approach raises concerns about trust and security. Some people have valid reasons for not trusting these central organizations, and having all voting data in one place makes it vulnerable to hacking. In theory, blockchain allows multiple parties to monitor a system while preventing any one person from controlling the information.

### The Bitcoin Connection

We can’t talk about blockchain without mentioning Bitcoin. Bitcoin is a prime example of blockchain in action. With Bitcoin, people can make financial transactions directly with each other, without involving a third party such as a bank. Every transaction is recorded in a public ledger, but the data is processed across a multitude of computers, preventing manipulation.

### Under the Hood of Blockchain

When it comes to understanding the workings of the network of computers involved in blockchain, things get a bit complicated. A blockchain is essentially a database shared across numerous computers running the same software. Each piece of data is secured using complex cryptography, ensuring only authorized individuals can add or edit it. The shared responsibility for adding or editing data prevents any individual or group from corrupting the system.

### Practical Applications of Blockchain

While still in its early stages, blockchain technology is being seriously experimented with in several areas. Aside from Bitcoin, this technology is being used by organizations like Democracy Earth to facilitate easier and more transparent voting on important issues. In addition, the diamond industry is utilizing blockchain to digitally track the ownership of diamonds, reducing the market for conflict diamonds.

### Can I Launch a Blockchain Startup?

The short answer is no. While blockchain is a powerful and promising technology, it’s essential to fully understand its complexities and potential applications before diving in.

In conclusion, while blockchain is certainly a hot topic, it’s crucial to comprehend its intricacies and real-world implications before jumping on the bandwagon.

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