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Music sales dropped by more than half over the next fifteen years.
Many newspapers were forced to merge or close. Writers and musicians
struggled to generate new revenue from their work. Anything that could
be digitized could be infinitely reproduced at no cost, effectively making
it worthless. The internet, it turns out, was extremely good at transferring
information and, in doing so, destroying value.
Given this reality, how could a digital currency exist? A ten-dollar bill
in your pocket can’t be reproduced. If you lose it, it’s gone. If you use it to
buy goods, the person receiving the money can trust that it’s real money.
A digital currency is just a computer file. It could simply be reproduced
by the holder and used repeatedly. Bitcoin, however, achieved something
extraordinary in the digital world: it’s almost impossible to counterfeit the
coins. Nakamoto accomplished this through blockchain.

THE BASICS OF BLOCKCHAIN
Blockchain is an online ledger, or a list of records. It identifies who owns
something at any given time. One group of Chinese blockchain experts
called it “the latest and most trustworthy form of bookkeeping.” Each
record is time-stamped and combined with other records via cryptography
to create a block. The blocks are independently checked and validated by
a peer-to-peer network, which consists of independent computers all over
the world. They combine the blocks into a chain (hence the “blockchain”),
including the most recent transactions.
If you wanted to pass a file to a friend, the blockchain would
establish that you are the current owner and then confirm the new owner.
The peer-to-peer network would validate the transaction and update
the blockchain. The file can’t be copied and distributed to anyone else.
There is only one file. Thus, blockchain effectively solves the problem of
digitization and makes a digital currency possible.
“A blockchain is like the digital version of a scarf knitted by your
grandmother,” wrote New Yorker reporter Nathan Heller. “She uses one

13 BITCOIN ANd BLOCKCHAIN