Scow Crypto 101 — Part 1 — A Simple Guide to Blockchain
We’re sure you’ve heard of bitcoin. In 2017, the digital asset became one of mainstream finance’s favorite subjects.
Today, partially due to extreme surges in price, the original cryptocurrency has a new, international fanbase.
However, ROI isn’t everything. Without Blockchain technology underpinning every digital coin and token, cryptocurrency would not exist.
So, what is blockchain exactly?
Well, a wealth of analogies can describe the technology. Here’s one:
Blockchain is somewhat like a global, ever-expanding, near-simultaneous game of checkers in which all moves are permanent and irrefutable. All players can actively monitor every move on the board regardless of geographic location
Wow, that’s a big checkerboard!
In case your appetite for a little tech talk just kicked in, here’s another way of looking at blockchain:
An incorruptible digital ledger which records transactions across a decentralized network of computers
Now, we know what you’re thinking. Although the tech is complicated, the concepts are not.
You don’t need to know how to code anything to understand the basics.
Before we dig in, you’ll want to know what these ‘blocks’ are. People seem to love putting them on chains these days…
Blocks are containers for digital data
Okay, now that we’ve cleared that hurdle, let’s look at blockchain’s three main attributes.
1) Chains of Blocks
As the name aptly describes, a blockchain is a set of blocks linked together in chain-like fashion.
And, similar to fingerprints, every block has a unique signature.
Most importantly, each block contains not only data of its own but also specialized information — called hashes — from any blocks it touches.
Chaining them together with unique connection points makes blockchains unbreakable. Nobody can go back to previous blocks and rearrange the data.
To further illustrate this point, let’s create an offline ledger of our own…
Picture three identical briefcases (blocks) hanging on a clothesline. Each contains a portion of a password, which relies on the proper order to become accurate. Holes drilled in each case (signatures) enable connectivity.
The first and second briefcases connect via top-left corners. The second and third briefcase each connect in the center.
Imagine trying to dislodge the second case and place it in front of the chain. Now we have misaligned connections and a scrambled message — in other words, a broken blockchain.
2) A Global Ledger
The Bitcoin network is essentially an army of computers spread all over the world. Moreover, some specialized computers — nodes — act as gatekeepers by verifying the authenticity of all transactions.
Every computer in the network helps keep the chain secure by providing computational power. The more computers adding resources to the network — known as hashrate — the less prone to attack the chain becomes.
The entire reason for decentralization in blockchains is to sidestep a central point of failure.
Bitcoin’s blockchain, being the most powerful, is the most secure and has never suffered a hack. Well, to be honest, not since a very early attempt in its infancy.
So many computers are now operating the Bitcoin network that even if a large percentage mysteriously stopped, the blockchain still works.
3) Incorruptible Transparency
Every block on a chain is cryptographically sealed. Without getting too technical, let’s just say that complex algorithms jumble data to keep it away from prying eyes.
Encryption aside, nobody can make changes to a blockchain without everyone knowing about it. (Unless they own 51% or more of a network’s hashrate. But that’s a topic for another day.)
Over 22 million wallets exist on the Bitcoin network. Moreover, since the blockchain never sleeps, any attempts at change are quickly detected.
Returning to our global checkerboard analogy, someone is always watching the board. And, safeguards are in place to prevent cheaters.
For example, players cannot take turns (make transactions) without entering their private key.
What’s a private key, you ask? Keys are similar to the password for your email account. While your email address stays public, you never give your password to anyone.
Crypto wallets operate on the same principle. You can safely give out your deposit address to collect payments, but always keep your private keys private. Don’t worry if digital wallets don’t make sense yet — we’ll cover them in a future post.
Getting Visual
Information is sometimes best absorbed when you can see it in action. Here’s a quick video explaining some blockchain basics:
Wrapping Up
Blockchain technology, while sophisticated, is becoming more widespread for good reason.
A secure, transparent, inexpensive means to exchange value has the power to disrupt a host of industries from finance to healthcare to supply chain.
Each of the three main attributes discussed above sprung from a desire to challenge the status quo. Blockchain technology’s true super-power is trimming the middleman out of everyday transactions.
For that reason alone, regardless of prices pegged to individual projects, blockchain’s global expansion is bound to accelerate.
Like the Internet is today, blockchain will one day be so ingrained into our daily lives that we won’t even think about it.
But until then, we hope this article gave you a deeper understanding of the revolutionary technology poised to change the world for the better.
