A system of interconnected computer related devices. This forms a digital network that allows for the sharing of resources.
Some of the devices on a network are:
- personal computers
- mobile devices
Data is housed on multiple servers which are mirrors of each other. This ensures that if one node is corrupted, there are others with the same data.
One of the challenges is hackers. With a centralized network, access in one area opens up everything. Companies go to enormous lengths to try and protect their data.
On a network, nodes can be connected either by wires or wireless.
A blockchain is a decentralized network of computer nodes.
On these networks, the base code is run on multiple computers, each running the same software. The data is mostly ledger information, recording cryptocurrency transactions. The ledgers resemble those of other financial institutions such as banks.
Unlike a centralized system where the different nodes are all under the control of one entity, node operators in a blockchain network are unrelated. The protocol is what enables the different nodes to arrive at consensus.
If one node does not match the rest, the transaction is rejected by the others. This makes the ledger immutable since the data cannot be changed. When it comes to monetary transactions, one of the largest breakthroughs of Bitcoin was the solving of the double spend problem.
That network used the Proof-of-Work protocol to arrive at consensus. Since that time, we saw the introduction of Proof-of-Stake as well as Delegated-Proof-of-Stake. Blockchains such as Hive also enable more than just financial transactions, moving to a fully decentralized database.
Under the central bank system, inter-bank transactions are recorded by the central bank. At the same time, commercial banks maintain ledgers of the currency that is flowing through the network. Each account is adjusted to maintain a proper balance as debits and credits occur.
There are a number of other financial institutions that are a part of the system. This includes brokerage firms, payment companies such as Visa, point of sale systems, automated teller machines (ATM), and investment banks. Each network is a ledger system, connected to other ones.
Throughout much of the 1900s, these were communication systems. With the computer age, these system were digitized becoming glorified computer networks.
This is the premise of ledger based money.