What is Blockchain Technology
The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
first major application of blockchain technology was bitcoin which was released in 2009. Bitcoin is a cryptocurrency and the blockchain is the technology that underpins it. A cryptocurrency refers to a digital coin that runs on a blockchain.
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.
The blockchain behind bitcoin is a public ledger of every transaction that has taken place. It cannot be tampered with or changed retrospectively. Advocates of the technology say this makes Bitcoin transactions secure and safer than current systems.
It is not issued by a central authority.
There is a limit of 21 million.
Currently, just over 17 million are in circulation.
The first transaction using bitcoin is widely believed to be carried out by a programmer named Laszlo Hanyecz, who spent 10,000 bitcoin on two Papa John’s pizzas in 2010.
The identity of Bitcoin creator Satoshi Nakamoto remains a mystery.
Bitcoin has often been used to buy illicit products such as drugs.
How the blockchain is tamperproof:
One of the advantages of blockchain is that it can’t be tampered with. Each block that is added to the chain carries a hard, cryptographic reference to the previous block.
That reference is part of the mathematical problem that needs to be solved in order to bring the following block into the network and the chain. Part of solving the puzzle involves working out a random number called the “nonce.” The nonce, combined with the other data such as the transaction size, creates a digital fingerprint called a hash. This is encrypted, thus making it secure.
Each hash is unique and must meet certain cryptographic conditions. Once this happens a block is completed and added to the chain. In order to tamper with this, each earlier block, of which there are over half a million, would require the cryptographic puzzles to be re-mined, which is impossible.
A Brief History of Blockchain:
The blockchain. Before it was ever used in cryptocurrency, it had humble beginnings as a concept in computer science — particularly, 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.
How Does Blockchain Work?
How does the blockchain work? 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 cannot be altered
To begin, we need to explore the concept of “keys”. With a set of cryptographic keys, you get a unique identity. Your keys are the Private Key and Public Key, and together they are combined to give you a digital signature. Your public key is how others are able to identify you. Your private key gives you the power to digitally sign and authorize different actions on behalf of this digital identity when used with your public key.
Why is Decentralization So Important?
For enthusiasts of the blockchain, you will hear a lot about the decentralized aspect of it. What makes this so appealing is that it makes the blockchain impervious to censorship, tampering, or corruption.
Because it uses a peer-to-peer network, copies of the ledger are stored in many different locations, and unless you manage to track down every single one of them (Bitcoin is estimated to have over 35,000 nodes in its P2P network), you can’t destroy it. As well, because so many different, independent nodes are keeping track of the ledger, modifying it in an untrustworthy way won’t go very far because all the other nodes will disagree with that transaction and won’t add it to the ledger.