The simplest definition of blockchain technology is a decentralized distributed ledger that records the provenance of digital assets. By inherent design, data on the blockchain cannot be modified, making it a legitimate disruptor in industries such as payments, cybersecurity, and healthcare. Our guide will walk you through what it is, how to use it and its history.
What is blockchain?
Blockchain, sometimes referred to as distributed ledger technology (DLT), makes the history of any digital asset immutable and transparent through the use of decentralization and cryptographic hashing.
A simple analogy to understand blockchain technology is Google Doc. When we create a document and share it with a group of people, that document is distributed, not copied or transmitted. This creates a decentralized distribution chain, giving everyone access to documents at the same time. No one is locked out waiting for changes from the other party, while all modifications to documents are recorded in real-time, making changes completely transparent.
Of course, blockchain is more complex than Google Doc, but the analogy is apt because it illustrates three key ideas of the technology:
Blockchain Explained: A Quick Overview
A blockchain is a database that stores encrypted blocks of data and then links them together to form a chronological single source of truth for data
Digital assets are distributed rather than copied or transferred, creating an immutable record of the asset
The asset is decentralized, allowing full real-time access and transparency to the public
A transparent change ledger maintains the integrity of documents, thereby building trust in assets.
Blockchain’s inherent security measures and public ledger make it a dominant technology in nearly every industry
Blockchain is a particularly promising and revolutionary technology because it helps reduce risk, stamp out fraud, and bring transparency to countless uses in a scalable way.
How does blockchain work?
The whole point of using a blockchain is to allow people — especially those who don’t trust each other — to share valuable data in a secure, tamper-proof way.
A blockchain consists of three important concepts: blocks, nodes, and miners.
piece
Each chain consists of multiple blocks, and each block contains three basic elements:
data in the block.
A 32-bit integer called a nonce. The random number is randomly generated when the block is created, and then the block header hash is generated.
A hash is a 256-bit number combined with a random number. It has to start with a lot of zeros (i.e. very small).
The random number generates a cryptographic hash when the first block of the chain is created. Unless mined, the data in a block is considered signed and forever associated with a nonce and hash.
miner
Miners create new blocks on the chain through a process called mining.
In a blockchain, each block has its own unique nonce and hash value, and also references the hash value of the previous block in the chain, so mining a block is not easy, especially in large chains superior.
Miners use special software to solve the extremely complex mathematical problem of finding a random number that generates an acceptable hash. Because the nonce is only 32 bits and the hash is 256, about 4 billion possible nonce-hash combinations must be mined before the correct one can be found. When this happens, miners are said to have found the “golden nonce” and their block is added to the chain.
Making changes to any block earlier in the chain requires remining not only the changed block, but all blocks after that. This is why it is extremely difficult to manipulate blockchain technology. Think of it as “mathematically safe” because finding golden random numbers takes a lot of time and computing power.
When a block is successfully mined, all nodes on the network accept the changes and miners receive financial rewards.
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node
One of the most important concepts in blockchain technology is decentralization. No single computer or organization can own the chain. Instead, it is through a distributed ledger of nodes connected to the chain. A node can be any type of electronic device that maintains a copy of the blockchain and keeps the network functioning properly.
Each node has its own copy of the blockchain, and the network must algorithmically approve any newly mined blocks in order to update, trust, and validate the chain. Since the blockchain is transparent, every action in the ledger can be easily checked and viewed. Each participant has a unique alphanumeric identification number that identifies their transactions.
Combining public information with a system of checks and balances helps the blockchain maintain integrity and build trust among users. Essentially, blockchain can be thought of as the scalability of trust through technology.
Cryptocurrencies: The Beginning of the Rise of Blockchain Technology
The most famous use of blockchain (and perhaps the most controversial) is that of cryptocurrencies. Cryptocurrencies are digital currencies (or tokens), such as Bitcoin, Ethereum or Litecoin, that can be used to purchase goods and services. Like cash in digital form, cryptocurrencies can be used to buy everything from lunch to your next home. Unlike cash, crypto uses blockchain as a public ledger and an enhanced cryptographic security system so online transactions are always recorded and secured.
How do cryptocurrencies work?
Cryptocurrencies are digital currencies that use blockchain technology to record and secure every transaction. Cryptocurrencies, such as bitcoin, can be used as a digital form of cash to pay for everything from everyday items to commodities like cars and homes. It can be purchased using one of several digital wallets or exchange platforms and then digitally transferred when the item is purchased, with the blockchain recording the transaction and the new owner. The appeal of cryptocurrencies is that everything is recorded on a public ledger and secured using cryptography, providing an irrefutable, time-stamped, and secure record of every payment.
To date, there are about 6,700 cryptocurrencies in the world with a combined market capitalization of about $1.6 trillion, with Bitcoin accounting for most of the value. These tokens have become so popular over the past few years that one Bitcoin is worth $60,000. Here are some of the main reasons why everyone is suddenly noticing cryptocurrencies:
The security of the blockchain makes theft more difficult because each cryptocurrency has its own irrefutable identifiable number attached to one owner.
Cryptocurrencies reduce the need for personalized money and central banks — with blockchain, cryptocurrencies can be sent to anywhere and anyone in the world without currency exchange or central bank intervention.
Cryptocurrencies Can Make Some Rich — Speculators have been pushing up the prices of cryptocurrencies, especially Bitcoin, helping some early adopters become billionaires. Whether this is actually a positive remains to be seen, as some retractors believe speculators are not thinking about the long-term interests of crypto.
More and more large companies are starting to embrace the idea of blockchain-based digital currency payments. In February 2021, Tesla famously announced that it would invest $1.5 billion in Bitcoin as a payment method for cars.
Of course, there are many legitimate arguments against blockchain-based digital currencies. First, cryptocurrencies are not a very regulated market. Many governments have been quick to dabble in crypto, but few have a firm statute on it. Also, cryptocurrencies are very volatile due to the speculators mentioned above. In 2016, the price of Bitcoin was around $450 per coin. It then jumped to around $16,000 per coin in 2018, fell to around $3,100, and then increased to over $60,000. Instability caused some to become very rich, while most still lost thousands.
Whether digital currencies are the future remains to be seen. For now, it seems that the meteoric rise of blockchain is more like starting to take root in reality than pure hype. While it is still making progress in this new and highly explored field, blockchain also shows promise to surpass Bitcoin.
Beyond Bitcoin: The Ethereum Blockchain
Originally created as an ultra-transparent ledger system that runs on Bitcoin, blockchain has long been associated with cryptocurrencies, but the technology’s transparency and security have seen increased adoption in many areas, among them Much of it can be traced back to the development of Bitcoin. Ethereum blockchain.
In late 2013, Russian-Canadian developer Vitalik Buterin published a white paper proposing a platform that combines traditional blockchain functionality with one key difference: the execution of computer code. Thus, the Ethereum project was born.
The Ethereum blockchain allows developers to create complex programs that can communicate with each other on the blockchain.
Token
Ethereum programmers can create tokens to represent any type of digital asset, track its ownership and perform its functions according to a set of programmed instructions.
Tokens can be music files, contracts, concert tickets, or even a patient’s medical records. Recently, non-fungible tokens (NFTs) have been all the rage. NFTs are unique blockchain-based tokens used to store digital media such as videos, music or artwork. Each NFT has the ability to verify the authenticity, past history and sole ownership of digital media. NFTs have grown in popularity because they offer a new wave of digital creators the ability to buy and sell their creations, while receiving proper credit and a fair share of profits.
New uses for blockchain expand the potential of ledger technology to penetrate other areas such as media, government, and identity security. Thousands of companies are currently researching and developing products and ecosystems that run entirely on emerging technologies.
Blockchain challenges the current state of innovation by letting companies experiment with breakthrough technologies such as peer-to-peer energy distribution or decentralized forms of news media. Like the definition of blockchain, the utility of the ledger system will only evolve as the technology evolves.
blockchain application
Blockchain has almost endless applications in almost every industry. Ledger technology can be used to track financial fraud, securely share patient medical records among healthcare professionals, and even serve as a better way to track artist commercial and intellectual property rights for music rights.
The history of blockchain
While blockchain is a new technology, it already has a rich and interesting history. Below is a brief timeline of some of the most important and noteworthy events in blockchain development.
Year 2008
Satoshi Nakamoto, pseudonym for an individual or group, published “Bitcoin: A Peer-to-Peer Electronic Cash System”.
2009
The first successful Bitcoin (BTC) transaction took place between computer scientist Hal Finney and the mysterious Satoshi Nakamoto.
2010
Florida-based programmer Laszlo Hanycez used bitcoin to make his first purchase — two Papa John’s pizzas. Hanycez transferred 10,000 BTC, worth about $60 at the time. Today it is worth $80 million.
Bitcoin’s market cap officially surpassed $1 million.
2011
1 BTC = $1USD, making the cryptocurrency parity with the US dollar.
The Electronic Frontier Foundation, WikiLeaks, and others began accepting bitcoin as donations.
2012
Blockchain and cryptocurrencies have been mentioned on popular TV shows like The Good Wife, infusing blockchain into pop culture.
Bitcoin Magazine was launched by early Bitcoin developer Vitalik Buterin.
2013
BTC market cap exceeds $1 billion.
Bitcoin hits $100/BTC for the first time.
Buterin published the “Ethereum Project” paper, implying that there are other possibilities for blockchains besides Bitcoin (e.g., smart contracts).
2014
Gaming companies Zynga, The D Las Vegas Hotel and Overstock.com have all started accepting bitcoin payments.
Buterin’s Ethereum project raised over $18 million in BTC through an initial coin offering (ICO) crowdfunding and opened up new avenues for the blockchain.
R3 consists of more than 200 blockchain companies and aims to discover new ways of implementing blockchain in technology.
PayPal announces Bitcoin integration.
2015
More than 100,000 merchants accept BTC.
Nasdaq and San Francisco-based blockchain firm Chain have teamed up to test technology for trading private company stocks.
2016
Tech giant IBM has announced a blockchain strategy for cloud-based business solutions.
The Japanese government recognizes the legality of blockchain and cryptocurrencies.
2017
Bitcoin hits $1,000/BTC for the first time.
Cryptocurrency market cap hits $150 billion.
JPMorgan Chase CEO Jamie Dimon said he believes blockchain is the technology of the future, giving the ledger system the trust of Wall Street.
Bitcoin hit an all-time high of $19,783.21/BTC.
Dubai has announced that its government will adopt blockchain technology by 2020.
2018
Facebook has promised a blockchain group and hinted at the possibility of creating its own cryptocurrency.
IBM has developed a blockchain-based banking platform, contracting big banks like Citi and Barclays.
2019
Chinese President Ji Xinping publicly embraces blockchain as China’s central bank announces it is developing its own cryptocurrency
Twitter & Square CEO Jack Dorsey Announces Square Will Hire Blockchain Engineers to Shape the Company’s Future Crypto Plans
The New York Stock Exchange (NYSE) Announces the Launch of Bakkt — a Digital Wallet Company Including Crypto Trading
2020
Bitcoin almost hits $30,000 by the end of 2020
PayPal announces it will allow users to buy, sell and hold cryptocurrencies
The Bahamas becomes the first country in the world to launch its central bank digital currency, aptly dubbed the “Sand Dollar”
Blockchain has emerged as a key player in the fight against COVID-19, primarily for the secure storage of medical research data and patient information.
