Blockchain beginner’s guide

Blockchain

The blockchain is the latest revolution in technology world. Is it really the start of the new digital era? The concept of blockchain is ingenious invention of a person (or a group of people) known by the pseudo name, Satoshi Nakamoto in 2008. They designed Bitcoin and as a part of the implementation, they also devised the first blockchain database. On January 3, 2009 first block named ‘Genesis’ was mined. Bitcoin, the first decentralized currency was used to solve the mathematical problem without the use of central server. Ever since, blockchain technology has evolved enormously. Blockchain is a distributed database that maintains a continuously growing list of records (blocks). The idea of a blockchain is based on a ledger. It is a book of transactions and each block is a page of the book which records transactions of two parties efficiently and in verifiable way which is penned only. It means, new transactions can only be added and once they have been added, its permanent, they can’t be changed by anyone.

Blockchain Technology

Blockchain is a combination of network and database. Every transaction that is being recorded in each block is being recorded simultaneously on many other computers through peer-to-peer network. Every block registers the transactions (chunks of data) along with timestamp and link to previous block. This helps participants to verify the data (audit) and an is inexpensive. Blockchain secures the data by storing it identical across the network. Since, there is no admin (single entity), any alteration in data is impossible. Another, benefit of this technology is that data is never lost, because of multiple copies. Data access is fast and doesn’t require any other party involvement. You just need to have the address and you can retrieve the data anywhere at any time, its autonomous.Blockchain was originally designed for bitcoin to record the transaction just like a ledger. Bitcoin allowed people to send money instantly across the globe without any government involvement for negligible fee. It is widely used for micropayments and ecommerce. By 2013 people started realizing that bitcoin and blockchain technology can be used for various other applications.

Blockchain technology is widely accepted because of its unique features:

  • Decentralized database — shared, distributed ledger — Secured
  • Decentralized computers — Peer to peer networking — Verifiable
  • Decentralized Application
  • Reduces cost — Inexpensive
  • Accessible — No downtime — Remove point of failure
  • Transparency — Preventing censorship — Trust
  • Creation and real-time movement of digital assets — Time stamping -Global Networking — Can’t be currupted
  • Self-execution of business logic with self-enforcement — ownership concepts

Blockchain and Ethereum

Ethereum is a blockchain. Few adjustments are made in the original (Bitcoin) blockchain concept to make Ethereum work better. It is a platform which is designed for decentralized applications (DApps).
The Ethereum clients (Etherbrowser) include ability for peer to peer connection to send messages and a generalized blockchain with a built-in programming language. It allows people to use blockchain for any kind of decentralized application that they want to create. Possible applications of Ethereum can be -

  • Building the financial application that are trustworthy and transparent because they run on the blockchain.
  • For managing property and contracts with online cryptographically secure system.
  • Social networking and messaging system that allows user to manage their own data.
  • System for trading underutilized CPU time and hard drive space.
  • Even online voting and distributed governance.
    Most exciting application of Ethereum are probably that we haven’t thought of.

Ethereum provide a universal programmable blockchain and packaging it up to a client that anyone can use. The Ehetrum project hopes to do the same for finance, peer to peer governance and human collaboration.

Blockchain Protocols

Formerly, most protocols of blockchains were designed like single purpose tools that are specifically designed around one particular application (transaction type). For example, in Bitcoin — “Currency”, Namecoin — “Domain registration”, Primecoin — “Trying to do scientific computing” etc. Then, comes second generation protocols. Here, we know 50 different transactions types. Protocol development was based on this prior information. Every time someone come up with a new type of transaction that was deemed enough to be worth including, the engineers creating protocols just add new transaction type to the existing protocol. Vitalik Buterin (founder of Ethereum) has even worked for this system for quite some time. He believes that this way of making protocols should be fundamentally eliminated from the modern world of computing. So, he comes up with a solution that is very similar to the concept of a smart phone. The idea here is that instead of having a protocol designed around every particular type of transaction (use case), we just create a general-purpose operating system and allow people build on top of it as application. He wants to make blockchain useful in more generic term rather than specific one was and this is the base concept of Ethereum.

Additions to the blockchain (for Ethereum)

Built in programming language — People can write program in scripts (HLL complied down in a script). Then take the complied scripts, put them into transactions and sent the transactions off to the blockchain. When the transaction gets confirmed, an address is generated. A special kind of account is created at that address, called ‘contract’.There are two types of accounts -

  • User Account is for general people (human). These accounts are controlled by private keys.
  • Contract is set of instructions and is controlled by code. If you send 1 ETH to the account that is controlled by contract of code then, no person controls that any more. The only thing that can move that ETH is the execution of contract of code itself.

Each of these accounts have completely equal privileges. Anyone can create an application with any rules by defining it as a contract. If you have an application, write the rules of your application in the code (contract) and upload it on the blockchain.

This is a repost of original post Blockchain beginner’s guide (part — 1) and Blockchain beginner’s guide (part -2) at EtherWorld.co.

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