What is blockchain technology? How it works? What is Bitcon? What is Etherium? These are all the questions that I’m going to answer in this explainer.
So, if you want to learn more about’em then read-on as everything is explained in plain, simple terms.
What is Blockchain Technology?
The record-keeping technology enables its users to make instant transactions on a network without any third party such as banks.
All the transactions are completely secure, and a copy of each transaction is kept by the blockchain technology. Now, it functions somewhat similar to a bank as it also keeps a record of transactions, but what makes it different is that no record of a transaction on blockchain can be changed after the fact.
One thing of importance that needs to be mentioned here is that this technology is emerging, which means it’s still in the evolving phase and is being tested. With the top forty or so companies trying it out, the blockchain technology has been particularly embraced by the financial services industry and many more various industries stand to benefit from it.
The point I’m trying to make here, is that people are still figuring out how exactly they can use this technology to their benefit by cutting costs and keeping quality products and services around.
Here’s a closer look at how the blockchain technology functions.
How the Blockchain Technology Works?
As its name suggests, this technology is literally just a chain of blocks, with each block representing data, strung together with other blocks in a specific order. 4 things must occur first in order for a new block to be added to the chain:
- A transaction must occur. Let’s take the example of an Amazon purchase, after a long search you finally make a purchase.
- That transaction must be verified. Once the purchase is made, now your transaction must be verified with other public records of information. It is done by someone who supervises the screening of new data entries. With blockchain, this job is performed by a network of computers, consisting hundred & thousands of computers spread across the world. Coming back to the Amazon purchase example, once you make a purchase, the network of computers rushes to check that your transaction happened in the way you said it did. That is, they confirm the details of the purchase, including the dollar amount, transaction’s time, and participants.
3.That transaction must be stored in a block. A go ahead is only given once the verification is done and it comes positive. The transaction’s amount along with the digital signatures of both participants are all stored in a block, where it’ll likely join others like it.
- A hash must be given to the block. Hash (a unique, identifying code) must be given to the block, once all of its transactions have been verified. The block is also given the hash of the latest block added to the blockchain. The block can be added to the blockchain once it is hashed.
The new block becomes public once it’s added to the blockchain, available for everyone to view. If you check out the blockchain of any cryptocurrency, you’ll find that you have access to a whole lot of information such as when, where, and by who the block was added along with the transaction data.
How is the Blockchain Technology related Bitcoin?
The main aim of blockchain technology is to enable the recording and distribution of digital data, but not editing. The idea of it was outlined in 1991 by 2 researchers who wanted to build a system where document timestamps could not be altered.
The technology saw its first real-world application in the shape of Bitcoin in Jan ‘09. In a research paper introducing the first virtual currency, Satoshi Nakamoto (Bitcoin’s pseudonymous creator) referred to it as “a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”
As mentioned above it was the first virtual currency, all digital currencies created since then are called altcoins. Ethereum, Litecoin, Peercoin, Feathercoin, and hundreds of other coins are all altcoins because they are not Bitcoin.
A look at Ethereum!
The blockchain technology is also used to build applications with functions beyond just supporting a cryptocurrency. Such applications are often referred to as Crypto 2.0 or even Bitcoin 2.0.
Launched in July ‘15, Ethereum is the most well-established, open-ended distributed computing platform and operating system that enables SmartContracts and ĐApps to be built and published without any downtime, control or interference from a third party. Along with being a platform, it’s also a programming language running on a blockchain; helping developers to build and run distributed applications.
Well, in Ethereum’s own words:
“Ethereum is a global, open-source platform for decentralized applications. On Ethereum, you can write code that controls digital value, runs exactly as programmed, and is accessible anywhere in the world.”
Ethereum has a diverse range of potential applications which run on its currency vehicle, Ether. Used for moving around on the Ethereum platform, Ether is sought by developers looking to develop and run applications inside Ethereum.
Ether has two main purposes:
- It is traded like other cryptocurrencies
- And is used inside Ethereum as a vehicle to run applications and even to monetize work.
What’s Next for Blockchain Technology?
Blockchain has come a long way since 1991, over the course of decades it saw its fair share of public scrutiny, with everyone around the globe speculating about its capabilities and future.
Now going into its thirties, the blockchain’s technology many practical applications have already been implemented and explored, thus bringing it the recognition that it deserves. At the moment, it’s on the tongue of every investor, as the technology stands to make government and business operations more efficient, accurate, and secure.
Today, the question is not “if” legacy companies will catch on to this cutting edge technology instead it’s a question of “when.”