One of the hobbies I picked up last summer was cryptocurrency and blockchain technology. Unfamiliar with both I started investing more and more time into learning all I could about it. By now, I would say there is a high chance you have heard the term ‘Bitcoin’ well bitcoin uses a blockchain to function. Like the name implies, a ‘block’ is the current part of a blockchain, which holds some or all recent transactions. Every time a ‘block’ is completed it goes into the ‘blockchain’ serving as a permanent database. A countless number of blocks exist in a blockchain and every time one is completed a new one is generated. These new and old blocks connect to each other in a chronological order where every block contains a ‘hash’ of the previous block.
The blockchain contains all the user information and their balances starting from the genesis block to the most recent completed block. Meaning that throughout the rest of time the transactions that take place on the blockchain cannot be deleted or copied only distributed.
So how does bitcoin use blockchain technology to operate? Well, for starts bitcoin isn’t regulated, has no central authority, but instead, users dictate and validate transactions that occur. This eliminates the need for a third party to process or store payments because completed transactions are publicly recorded into blocks, which eventually go into the blockchain itself. Once the block goes into the blockchain it is verified and relayed by other bitcoin users. The bitcoin protocol is shared by all that participate in the system and once you join the network, you receive a copy of the blockchain, which contains the records of previous transactions. So now every connected computer serves as a means of proof of every transaction ever executed.
Think about it like this, every ‘block’ is an individual’s bank statement and the blockchain is the full history of all the banks’ transactions. Due to the secure and open nature of blockchain technology, people could use it as a means of registering vehicles, storing medical records or even used as a voting system. Blockchain removes the middleman, making currency decentralized and would reduce costs across all industries that utilized its technology.
Let’s say I wanted to send money to my friend James. This transaction would be represented online as a ‘block’ or statement, which would then be broadcast to every party in the network. Those in the network would then need to approve the transaction and validate it. Next, the block would be added to the blockchain and would contain an indelible and transparent record of the transaction between myself and James. Once the block is added to the blockchain, the money I sent to James would then be placed in his account and the transaction would be complete.
This is just the tip of the iceberg of what all blockchain technology is all about. I can’t wait to share some of the cool things happening in that space with you all.