Blockchain is a word commonly associated with cryptocurrency and today, it is more commonly referred to as the Distributed Ledger. However, many do not know that though these two are related, blockchain can (and is) used for various other things besides cryptocurrency.
Essentially, cryptocurrency needs blockchain to exist but blockchain does not need cryptocurrency to exist, just as emails need the internet but the internet does not need emails.
It is deemed the most important invention in this century by a lot of tech experts. Here are all the basics about blockchain to get you started.
What is Blockchain?
Harvard Business Review describes blockchain as
“An open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.”
Blockchain is composed of blocks which contain lists of records. These records are linked together via cryptography. What connects the blocks to each other is a thing called cryptographic hash or hash for short. The blocks are also linked to each other with timestamps and transaction data.
Blockchains cannot be modified, meaning it is immutable. It can be viewed by everyone through the distributed ledger managed by a peer-to-peer network. This makes it extremely vital as every transaction and records stay permanent and transparent.
The History of Blockchain
Created by Satoshi Nakamoto, it was built as a public transaction ledger for Bitcoin, according to The Economist. It was created to ensure Bitcoin transactions will be secure and that there will be no double-spending since they do not have any kind of trusted authority or central server governing it.
Nakamoto wrote that they actually began coding it in 2007 and the first bitcoin network called block number 0 which rewarded 50 bitcoins existed on 3 January 2009.
Satoshi Nakamoto is a pseudonym for a person or a group of people, and their true identity remains unknown to this day.
Benefits of Blockchain
- Storing Information
Blockchain was made to store information and the information cannot be altered. If any changes or alteration occurs, a new block will be created with the new changes included inside. Meanwhile, the block containing the previous information is still accessible and cannot be removed, which means all information is absolute and all alterations are made transparent.
Everything recorded also contains a timestamp showing when the information was updated, making everything trackable.
Decentralisation generally means the dispersion or distribution of functions and powers. In blockchain’s sense, it means there isn’t one single person, government or authority which oversees the database. Instead, thanks to interoperability, it is distributed across a large network of computers allowing everyone to see the transactions. This system is called the Distributed Ledger Technology.
The ledger is distributed across 10,000 nodes around different countries.
According to Coinmonks, there are a few steps before a block can be added to the chain. They are:
- Cryptographic puzzles must be solved to create the block. When a computer solves the puzzle, it shares the information to other computers which share the network. This is called proof-of-work.
- The network of computers will verify this information and if it is true, then the block will be added to the chain.
- The complex cryptographic puzzle and the verification from those other computers from the network create trust for every block on the chain.
Clearly, this technology is far more sophisticated to be limited to usage for cryptocurrency only. Blockchain can be used in all sorts information storing and quite a number of major companies are already using them such as IBM, Microsoft, Mastercard, FedEx, Huawei Technologies and even Bank of America among many more.
Everyone might be raving about Artificial Intelligence but we should also give blockchain the recognition it deserves.