A Beginners Guide to Blockchain
Dear Intrachain Community,
In my blog post next week I will expalin the blockchain technology in regards to our Intrachain software. Since I still get a lot of questions from friends and family about “what blockchain actually is?!”, I thought it can be of interest if I summarize the technology here once again.
If you are new to cryptocurrencies, and new to blockchain technology, read this guide on the basics to get yourself started. If you are already a seasoned trader, maybe you’ll learn a thing or two you didn’t know yet.
We all have heard the term “blockchain technology” before, especially in reference to Bitcoin and other cryptocurrencies. For most people, those terms might seem abstract with little real meaning on the surface. However, blockchain technology is a critical element of cryptocurrencies — without it, digital currencies like Bitcoin would not exist.
Therefore, I think it is important to explain those abstract terms in a little less abstract way. To start, let’s talk about the history of the blockchain.
A Brief History of Blockchain
Before blockchain was ever used in cryptocurrency, it had humble beginnings as a concept in computer science — more specifically, in the domains of cryptography and data structures.
The very primitive form of the blockchain was the hash tree, also known as a Merkle tree. This data structure was patented by Ralph Merkle in 1979, and functioned by verifying and handling data between computer systems. In a peer-to-peer network of computers, validating data was important to make sure nothing was altered or changed during transfer. It also helped to ensure that false data was not sent. In essence, it is used to maintain and prove the integrity of data being shared.
In 1991, the Merkle tree was used to create a “secured chain of blocks” — a series of data records, each connected to the one before it. The newest record in this chain would contain the history of the entire chain. And thus, the blockchain was created.
In 2008, Satoshi Nakamato conceptualized the distributed blockchain. It would contain a secure history of data exchanges, utilize a peer-to-peer network to time stamp and verify each exchange, and could be managed autonomously without a central authority. This became the backbone of Bitcoin. And thus, the blockchain we know today was born, as well as the world of cryptocurrencies.
Enough about the history: let’s talk about how this all actually works.
How Does Blockchain Work?
Blockchain is a complex concept, consisting of a blend of different technologies, each one a foundational pillar in making blockchain the revolutionary offering that it is.
Let’s recall a few key features before we get into the details:
1. Blockchain keeps a record of all data exchanges — this record is referred to as a “ledger” in the cryptocurrency world, and each data exchange is a “transaction“. Every verified transaction is added to the ledger as a “block”
2. It utilizes a distributed system to verify each transaction — a peer-to-peer network of nodes
3. Once signed and verified, the new transaction is added to the blockchain and can not be altered
A blockchain allows anyone to send value anywhere in the world where the blockchain file can be accessed. But you must have a private, cryptographically created key to access only the blocks you “own.” By giving a private key which you own to someone else, you effectively transfer the value of whatever is stored in that section of the blockchain. So, to use the bitcoin example, keys are used to access addresses, which contain units of currency that have financial value. This fills the role of recording the transfer, which is traditionally carried out by banks.
It also fills a second role, establishing trust and identity, because no one can edit a blockchain without having the corresponding keys. Edits not verified by those keys are rejected. Of course, the keys — like a physical currency — could theoretically be stolen, but a few lines of computer code can generally be kept secure at very little expense. (Unlike, say, the expense of storing a cache of gold in a proverbial Fort Knox.)
This means that the major functions carried out by banks — verifying identities to prevent fraud and then recording legitimate transactions — can be carried out by a blockchain more quickly and accurately.
Why is blockchain so important?
The most important aspect of blockchain is the decentralized aspect of it. What makes this so appealing is that it makes the blockchain impervious to censorship, tampering, or corruption.
This is a huge part of why so many people believe blockchain technology is the future of currency, and why it is being adopted in industries other than cryptocurrency.
As I have already mentioned in the beginning, in my next blog post I will explain blockchain in regards to our Intrachain software. I hope this blog gave new insight into the blockchain technology. Stay tuned!
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I will keep you posted on exciting angles of the Blockchain Industry. In the meantime, feel free to contact me on Telegram to chat with me and my Co-Founders.
