Crypto Basics - What is Blockchain Technology?
Crypto Basics
Hey guys, I am excited to announce that I will be starting a new article series: Crypto Basics. I will cover common concepts in the crypto-world which may confuse newcomers. I will try to explain these concepts in the simplest way possible whilst trying my best to provide examples. If you have a topic that you would like me to cover, please comment down below and let me know. I think it would be a good idea to start off with the technology that makes cryptocurrencies possible: blockchain technology.
A Shared Public Ledger
A cryptocurrency network, such as the Bitcoin network, consists of a large collection of nodes forming a decentralised network. Anyone can download and run a Bitcoin node using software such as Bitcore: https://bitcore.io/. Every node on the network contains an exact copy of the public Bitcoin ledger and the ledger updates as new transactions occur. In the cryptocurrency world, a ledger is simply a list containing transaction information. All of the transactions that occur on the Bitcoin network are recorded in the public Bitcoin ledger. The ledger is separated into blocks, each block can hold a finite number of transactions. The implementation of a public ledger distributed across all of the nodes in the network is referred to as a blockchain.
Advantages of Blockchain Technology
- No need for intermediaries: blockchain technology eliminates the need for an intermediary (such as a bank) when sending and receiving money. This reduces transaction fees, increases transaction speed and eliminates the risk of an unreliable intermediary.
- Direct control of your money: blockchain technology allows you to control your funds directly. There is no risk of a third party freezing or losing your funds.
- Accessibility: blockchain data is transparent, up-to-date, complete and easily accessible.
- Immutable: due to the decentralised nature of blockchain technology, all transactions are immutable. It is impossible to hack/alter a transaction on the blockchain as all of the ledgers containing the transaction on the blockchain must be altered individually. This would require an impossible amount of computer power. Furthermore, transaction data cannot be lost by hacking or technical problems as there is no central point in the network to attack. If one node goes down there are thousands of others containing an exact copy of the public ledger.
There are many other applications of blockchain technology
Cryptocurrencies are only one application of blockchain technology. Blockchain technology is currently being used to deploy smart contracts, create digital assets, identity verification and the list goes on. New applications for blockchain technology are being developed everyday, our imagination is the limit! In the next Crypto Basics article I will be covering smart contracts; what they do and how they work. Follow me if you don’t want to miss it!
Please leave your thoughts down in the comments below.
Thanks for the post. What I don't understand yet, is how does the system know that the person making a transaction, really is who he says he is (i.e. the owner of an x amount of BC)? Another question, I often hear people mention that BC is finite, and will become more and more scarce (and because of that more expensive). However, if you can note an amount of BC in several decimals, does that concept still apply? Thanks!
An answer to your first question: Basically, when you receive X amount of BTC, that transaction is recorded on the public Bitcoin ledger. This ledger is shared throughout the network; there are thousands of copies. The ledgers are verified using a cryptographic hashing algorithm. Therefore, the system knows that you own X amount of BTC because it is recorded on the public ledger, which is unhackable. 2nd question: yes it does still apply. This is because you still have the same amount of BTC in circulation. For example, you can divide the number 1 into 2 halves (0.5, 0.5) or quarters (0.25, 0.25, 0.25, 0.25) but in the end, it still adds up to one: 0.5 + 0.5 = 1; 0.25 + 0.25 + 0.25 +0.25 = 1. Therefore, the scarcity isnt affected.
Congratulations! This post has been upvoted from the communal account, @minnowsupport, by CuriousEngineer from the Minnow Support Project. It's a witness project run by @aggroed, @ausbitbank, @teamsteem, @theprophet0, and @someguy123. The goal is to help Steemit grow by supporting Minnows and creating a social network. Please find us in the Peace, Abundance, and Liberty Network (PALnet) Discord Channel. It's a completely public and open space to all members of the Steemit community who voluntarily choose to be there.
If you like what we're doing please upvote this comment so we can continue to build the community account that's supporting all members.
Hi @curiosengineer and Everyone,
Our team, @EOS9CAT came with a very short explanation and hope it would be helpful for everyone here.
The blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. It features decentralization, immutability, security, and openness, comparing to traditional distributed systems. the most symbolic adaptation of blockchain technology is cryptocurrency (bitcoin, ripple and various coins) and decentralized applications (Ethereum, EOS and etc).
If you need any other questions, please feel free to send us an email at [email protected] or visit our website