Why Can’t You Understand Cryptocurrencies Without Understanding Blockchain?
If you are new to Crypto world or have invested in Bitcoin (or other Altcoins like Ether, Ripple, etc.) but do not really know about Cryptocurrencies, you might not be aware of Blockchain. Or you might be under an impression that Blockchain and Bitcoin are one and the same thing.
Many people today have this confusion (and they don’t even know that they have a confusion) and I have tried to answer a few questions around this in our course by BlockDigest and also on Quora (Links at the bottom of the article).
First let me burst this myth and tell you that “Bitcoin is NOT Blockchain and Blockchain is NOT Bitcoin”, they are 2 related but different things. Blockchain is the underlying technology using which Bitcoin and all other cryptocurrencies (more than 2000) are made of.
Satoshi Nakamoto (identity unknown) who created Bitcoin, never mentioned Blockchain anywhere in his Whitepaper. But practically he (or a group/ team) was the one who introduced this technology to the world. I don’t expect for readers to understand Blockchain in detail but I would like to give you a little understanding of it with an example of Bitcoin network.
There are many participants/ users who are part of Bitcoin network today and each second many people are transferring Bitcoins to each other (Using Crypto Exchanges like Coinbase, Binance, etc. or other methods). These transfers are nothing but transactions in the Bitcoin network (or any other Blockchain-based Cryptocurrency). These transactions are then bunched up into Blocks i.e. a few transactions are picked up and arranged in form of a Block, and each new Block is connected in some way to the previous Block (thus forming a link or a chain). So, looking at the way these transactions and blocks are arranged, some tech enthusiast started calling this technology as Blockchain.
But Why Is It Important To Understand Blockchain In Order To Understand Cryptocurrencies?
There are many Cryptocurrencies in market. If you look at them, they are nothing but digital tokens existing on some software (which most people neither understand and nor care about). But then it should raise the following type of questions in your mind:
· How are these Cryptocurrencies different from Digital version of fiat currencies i.e. Dollars, Pounds, Rupees, etc. that your bank provides you through online banking?
· If they are just digital tokens, why did it take so long for people to invent it?
· Who creates these Cryptocurrencies?
· What is so different about these Cryptocurrency Tokens that they are so hyped today?
· What government approvals or rules are applied to these Cryptocurrencies?
· Why to use them when we already have fiat currencies?
Now these are some smart questions that will make you read more and more around Cryptocurrencies. To answer all of the above questions, you need to understand the technology which is being used behind these Cryptocurrencies and that is Blockchain. Only when you understand Blockchain to a certain level, you will then be able to understand how Crypto works and how they are different from your regular fiat currencies (Dollars, Pounds, Rupees, etc.).
Blockchain Through Many Of Its Properties Make Cryptocurrencies Very Different From Regular Fiat Currencies. Properties Like:
1. Decentralized and Distributed Peer to Peer Network:
No one owns these Cryptocurrencies, rather all the participants together verify and validate all the transactions and blocks. Thus, there is no central authority in control (unlike in the case of Fiat Currencies). All the participants have equal rights and opportunities in such a network and no special authorities are given to any participant. All nodes in the network maintain a complete history of all transactions and blocks at all times and this gets updated regularly by in-built mechanisms.
2. Based on Strong Cryptographic Primitives:
Blockchain combines many Cryptographic techniques like Hash Algorithms, Asymmetric Key Cryptography, Digital Signatures, Merkle Tree, Zero-Knowledge Proofs, Ring Signatures, etc. and thus makes the whole Blockchain structure very robust and difficult to break.
3. Immutability:
Transactions that become part of a Block in Blockchain can never be modified or deleted, only new transactions can be added in new Blocks or older transactions can be read. This provides surety, that once a transaction is done, no one can deny, delete or modify it for their benefit.
4. Transactions are Public:
These transactions are visible to all the parties in the network. Some platforms like Zcash (ZEC) also gives you the facility to create Private transactions where crucial information of a transaction (Sender’s or Receiver’s identity, number of tokens being transferred, etc.) can be hidden.
5. Programmability:
Transactions can also be programmed. Platforms like Ethereum provide Smart Contracts facility which helps you create sophisticated programs that can be stored and executed on Blockchain itself. This feature has led to a lot of development around Blockchain across sectors. This feature can also help you put complicated rules on your newly created Cryptocurrencies.
6. Linked History Enables Easy Traceability:
Since each Block is connected to its previous block, any transaction or token can be traced back to its genesis (the point at which it was created) by any participant in the network. Thus, improves trust in the network.
7. Solution to Double Spending Fraud:
Blockchain with its built-in mechanisms will prohibit someone from spending the same tokens/ coins twice i.e. if Party A in Bitcoin network, tries to send the same Bitcoins to Party B and C both, then ultimately only 1 of those transactions will be part of the Bitcoin Blockchain network, the other transaction will be rejected eventually by the whole network.
Of course, Blockchain can be used in much more useful ways than just being a tech for Crypto. And in fact, today it is being used across sector throughout the world. Some industry experts believe that it will play a very vital role in coming times and some people also call it the next big thing after internet.
BlockDigest is one company that is focused on training and educating people on Blockchain. Apart from classroom trainings, they have a variety of Blockchain courses on their website:
https://blockdigest.thinkific.com/
There are several courses to choose from like:
Blockchain for Leaders — If you are an Entrepreneur, a Leader, a Manager, a Consultant, a Professional, or a Professor looking for application of Blockchain in their work area, can help you understand Blockchain in detail with real-world Blockchain implementation
Certified Blockchain Professional — Take you from Zero to Fluent in Blockchain.
Certified Ethereum Smart Contract Developer — Learn Blockchain and develop an end-to-end Smart Contract based application (dApp).
Cryptocurrency & Blockchain — Learn connection of Cryptocurrencies with Blockchain (the technical aspect of things)
For any other queries or issues you can email at: blockdigest@gmail.com
