Understand what digital currency is, why blockchain is used, and how a digital ledger keeps a record of transactions without turning this into a cryptocurrency deep dive.
Coins and banknotes are physical. You can hold them in your hand.
A digital currency is different. It only exists electronically. There is no physical coin or note to hold.
With digital currency, the important question is not, “Where is the coin?”
The important question is, “Who owns what, and how do we know the record has not been changed?”
That is why many digital currencies use a system called blockchain.
Imagine a town noticeboard where every payment is written down and pinned up for everyone to see.
Everyone in the town keeps a copy. If someone secretly changes one notice, the other copies will not match.
That is the basic idea of a blockchain: a shared record that is very difficult to alter.
When Alice pays Ben, the transaction must be recorded. The system adds details such as the sender, receiver and time.
This record becomes part of the digital ledger.
A block stores a group of transaction records.
When a block is complete, it is added to the previous block. This creates a chain of blocks: a blockchain.
Each new block links back to the one before it, so old records cannot simply be changed without breaking the chain.
| Term | Meaning |
|---|---|
| Digital ledger | A record of digital transactions |
| Block | A group of transaction data |
| Blockchain | Linked blocks that record transactions |
Blockchain is usually described as decentralised. This means the record is not held by one central organisation only.
Instead, copies of the ledger are shared across many devices. New transactions are added, but previous transactions are not meant to be altered.
Cambridge may describe a system with a digital ledger, time-stamped transactions, linked records and transactions that cannot be altered.
If the question asks for the name of this process, the answer is usually very simple:
Students sometimes use examples of digital currency when the question is asking for the process that records the transactions.
A digital currency only exists electronically or virtually.
Many digital currencies use blockchain to record transactions. A blockchain is a digital ledger made from linked blocks of transaction data.
Transactions are time-stamped, shared across many devices, and are designed so old records cannot easily be altered.
Now that you understand digital currency and blockchain, the next lessons explore cyber security threats and how users and networks protect themselves.