A primer on blockchaining: The technology behind digital currency

Blockchaining. The technology is complex, but here’s a simple outline. A “block” is a record of a transaction between two people that’s permanently stored in a database. The database is encrypted so the record of transactions can never be hacked or altered. A “chain” is a series of blocks stored in time sequence. (Think of a chain as the register in your checkbook and a block as a single entry in that register.) Also, every member of a blockchain has a copy of it, so there’s no central server to be hacked. To access your digital funds, you need a digital key that lets you into the database and a second key that opens your personal account in the database. Only when you have both can you get hands on your money. It’s a double layer of security. The transactions also don’t require a bank or other middleman. For example, the “Transactive Grid” in Brooklyn, New York, uses blockchains to link houses that have rooftop solar panels to their neighbors who want to buy solar electricity. The blockchain database records the transactions and handles billing. Another example are SolarCoins. People or businesses that generate solar electricity can claim one SolarCoin for every megawatt-hour of solar electricity they generate and can document through their utility. Participants submit proof to the SolarCoin Foundation, which credits their accounts with digital credits to make other purchases.  The purpose is to create additional incentives to abandon gas and oil and switch to solar power. SolarCoin uses the same technology to account for and manage transactions that Bitcoin does. Also, like Bitcoin, SolarCoins can be used as digital currency between any two people that agree that SolarCoins represent genuine value. And even JPMorgan Chase, whose CEO, Jamie Dimon, claims Bitcoin is a “fraud” that is about to blow up, has reportedly begun using blockchain, the technology behind Bitcoin, to cut trading costs.

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