Understanding Blockchain 101
Everyone who’s anything about blockchain might’ve heard about bitcoins, the most widely used application of blockchain. So maybe, understanding how bitcoins work may help you understand how blockchain works, but there sure is very different versions of blockchain built for various other applications like supply chain management, secure sharing of data, etc.
Bitcoin - The form of currency you wish you had invested in during its inception.😄
Bitcoin (₿) is a cryptocurrency. It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.
Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamotoand started in 2009 when its source code was released as open-source software. Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. Research produced by University of Cambridge estimates that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.
So that’s the Wikipedia definition of what bitcoin is. Okay, so what’s that in simple layman terms?
Bitcoin is a digital and global money system currency. It allows people to send or receive money across the internet, even to someone they don’t know or don’t trust. Money can be exchanged without being linked to a real identity.
How Blockchain is different from the Traditional Banking System - The one that you all are familiar with(hopefully🤞).
So some of the few key features are:
- Decentralization
- Anonymity
- Security
Decentralization
This word is thrown around a lot in the crypto-currency world. All it means is that there is no central point of control(like Reserve Bank or govt. in our case) in the Bitcoin network. The Bitcoin network is designed to be hosted and used by regular people. There is no Bitcoin company, there is no data centre.
Anonymity
Users have an address that holds their balance, much like an email address. Balances are public, but there is actually no way to relate an address to a person unless that person decides to give their address away. Here is an example Bitcoin address: bc1qvw0ytfntx6zs0lfsruem6xwj0mewng523ktatp
Security
I’m not going to confuse you with private key v/s public key gibberish in here. Bitcoin is the most secure network I’m aware of. Not a single Bitcoin in the last ten years has ever been fraudulently spent. There is nothing to hack. There is no central server that holds the balances, passwords, and usernames. In fact, every computer owns a copy of the balances, but each user holds their own keys that control those balances.
Here enters the hero of the show…..
Bitcoin is blockchain but the vice-versa is not so correct.
In super-simple terms, a blockchain is a computer file for storing data. Or, to put it in more technical jargon, it’s an open, distributed ledger, which means the data contained within the blockchain is distributed across many computers and is therefore decentralised.
Decentralised. Distributed. This sounds a bit like Bitcoin…
Well done Sherlock! Blockchain is the technology that underpins Bitcoin and it was developed specifically for Bitcoin. So, Bitcoin was the first example of blockchain in action and without blockchain, there would be no Bitcoin. That’s why the two names are so often used interchangeably.
But that doesn’t make them the same, there are so many other applications for blockchain out there...
Because blockchain and Bitcoin are so inextricably linked, it took people a long time to realise that blockchain actually has much wider applications beyond cryptocurrency networks. In fact, blockchain’s potential is so great that many people (myself included) believe the technology will revolutionise the way we do business, just like the internet did before it.
Here are just a few examples of the wider applications of blockchain beyond Bitcoin and other cryptocurrencies:
- Executing smart contracts.
- Maintaining a shared, transparent system of record.
- Auditing the supply chain.
- Providing proof of insurance.
I’m just proving my points in a very technical way throwing all these jargons at you. For more clarity, do your own research.
Still, confused?
Totally understandable, if a picture is worth a thousand words, then a 60fps 6-minute video with 21600 frames can say 21,600,000(roughly 21 million words, way more than what I wrote for sure)….
I’m really sorry, I had to do that.😂😂😂🙏
So the video……..
