What is blockchain?
A Blockchain is a decentralized ledger. Instead of a central authority it’s maintained by so called miners. Miners add transactions to the ledger and keep a copy of the blockchain.
The major innovation of blockchain technology is that peers can reach consensus in a decentralized manner. Miners need to contribute significant computing power to win the right to add a new block to the blockchain. For each accepted block a miner is rewarded with a fixed amount of bitcoin.
You may wonder, if there is no central authority, who checks that nobody cheats the system? A combination of financial incentives and cryptography ensure that no user can benefit from cheating.
A malicious miner would have to use more power than the majority of all honest miners combined to convince the network that its version is the real one. Due to the cost of electricity, it’s not feasible to do so. The incentive of the block reward and the distribution of mining power enforce honest behavior.
Blockchain transactions are appended to the ledger in batches “called blocks” and every block of transactions references the previous block. If someone would try to change a past transaction, it could not be kept secret, because it would break the cryptographic link to all the blocks with transactions that followed it.
While Bitcoin was the first application of blockchain technology, it can be used for many other applications.