and conveys financial transactions. In short, it redefines the role of the middleman in the financial services industry. E-mail enabled us to send a better message, faster and more efficiently. Bitcoin does the same thing for money.
Let's take a deeper dive into how Bitcoin acts as a tool to verify, clear, and convey financial transactions. The revolution is the combination of the blockchain and the miners – together, these components become the reinvented financial intermediary. The blockchain records every transaction, while the miners verify and convey the transaction.
Starting with the very first bitcoin created, the Bitcoin software began recording its every move. I always find it easier to humanize new concepts, so let's call the first bitcoin a socialite named Genesis. Wherever Genesis goes, the blockchain records her movements. In essence, it is taking pictures of her every move and recording it for posterity. Every 10 minutes, these pictures are gathered into a file called a block. Inside this file is a picture of not just Genesis, but all her friends, too; wherever they went in the last 10 minutes is recorded in the file. Also included in this new file is a picture of the previous block. This picture of the past links all the blocks together, forming a chain called the blockchain. Have you ever taken a picture of yourself in a double mirror? The same effect occurs with Bitcoin: it appears you can see forever.
The blockchain is the paparazzi of the Bitcoin world. Wherever Genesis goes, she is followed by photographers: if she buys a pack of gum, the paparazzi are there; if she goes out to a club, the paparazzi are there; even if she just sits at home on her couch, the paparazzi are there recording everything. Now when Genesis gets spent at the club for a bottle of Crystal, the miners get involved.
The miners solve a mathematical puzzle that lets them see all the pictures the paparazzi took of Genesis. The miners go back and trace her every move to make sure the Genesis at the club is the real Genesis and not an imposter. The first miner to solve the puzzle and look at all the pictures is paid in bitcoins.
What makes Bitcoin strong is that anyone can be a paparazzo and anyone can be a miner. Anyone who downloads the Bitcoin software also downloads the entire blockchain, which means all the pictures are not stored in a single place. The pictures are distributed all over the world on an infinite number of computers. If one computer crashes, the Bitcoin network keeps humming along. If I spill coffee on my computer or I get hacked, the Bitcoin network just uses the other computers.
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