Bitcoin and Blockchain FAQ Simplified
Question: “What is Bitcoin ?”
A Bitcoin is a token released on the first ever blockchain.
Question: “What is a Blockchain ?”
A blockchain is a set of transactions compiled to form blocks,and blocks arranged together bearing direct correlation to the previous block that existed.These blocks are assembled together by miners for a reward.Every person mining has a copy of all transactions made, essentially the whole of Blockchain.
Question: “What types of blockchains exist ?”
Three types of blockchains exist:
Public: Anybody can mine, acquire tokens and use them to transact.
eg: Bitcoin & Ethereum
Private: Ability to mine, acquire tokens and usage is largely restricted to private companies or organizations.
eg: HyperLedger, Multichain and open chain instances
Consortium: Ability to mine, acquire and trade tokens is restricted to a select group of organizations or people.
Question: “What makes the Blockchain so Fascinating ?”
Blockchains have addresses and depending on the type of blockchain, owners of the addresses are either anonymous or known within organizations.
Each address can send or receive tokens.Tokens from Two of the most famous Public blockchains are Bitcoin and Ethereum. The value of the token is determined by the demand for it. Blockchains hold within it every single transaction performed. Initial transactions made during the advent of Bitcoin is still present and it shall do so as long as there is someone mining.
Question: “How is it secure?”
Given that Blockchains hold every transaction made and this ledger of transactions is present with every miner, ensures that tampering with transactions would mean having to physically change transactions present with each and every miner. Transactions are sorted and recorded into blocks based on consensus and the amount of fees paid by the sender of the token determines
Question: “Proof of Stake vs Proof of work”
Proof of stake and proof of work are algorithms designed to process and record consensus.
Proof of work rewards participants who solve complicated cryptographic puzzles in order to validate transactions and create new blocks.
In Proof of Stake, the creator of the next block is chosen in a deterministic (pseudo-random) way, with the possibility that an account is chosen depends on its (account’s) wealth.
References:
https://en.bitcoin.it/wiki/Block_hashing_algorithm
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