Bitcoin has been one of the hottest topics of the past year -- in 2013 its value rose more than fiftyfold. But while the conversation around the cryptocurrency has varied from price volatility to its legitimacy, many overlooked bitcoin's key innovation: the "block chain."
The block chain is a public ledger of all bitcoin transactions. Transactions are verified on a peer-to-peer network when computers running bitcoin software – or "nodes" – reach a consensus, which prevents double spending or forgery. The block chain is the key to keeping bitcoin transparent, decentralized and secure; it ensures that everyone holding bitcoins has an exact copy of this ledger and that all transactions are recognized and verified by the peer-to-peer network.
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More importantly -- the block chain removes the need for a third-party.
Bitcoin allows for the transfer of money without using a third-party intermediary. Through the block chain the decentralized peer-to-peer network verifies the transaction without imposing hefty transaction fees.