What is Blockchain?
A blockchain is simply an online record of transaction, it could be money transaction, movement of goods, exchange in information etc. Everything we do in our lives, contains a transaction, so we can say that there is an unlimited usage for blockchain technology.
Blockchain is a universal database in the form of a digital ledger which anyone can use, with an internet connection, it doesn’t belong to anyone and at the same time, it belongs to everyone!
These records of transactions then will gather together into a “Block” and these blocks are linked together using a cryptography protocol.
Every time something in the blockchain is changed, everyone in the network (call them node) gets a notification about that change (it doesn’t matter whether it's a big change or a small one), and they have to verify that change or in other words agree on that, this process is called “consensus” . This is actually what makes blockchain very difficult to hack.
Since the introduction of bitcoin in 2009, many people have built different kinds of this original idea, the differences were in their functionality such as their type of consensus and the protocol that they’ve built their coins based on.
All of these functional differences come down to a critical question...
“How does a network verify that all the transactions are correct?”
Blockchain is a universal database which anyone can use, with an internet connection, it doesn’t belong to anyone and at the same time, it belongs to everyone!
Who has invented the Blockchain?
The original idea of cryptography, was first presented by “Hellman, Merkle and Diffie” on 1976 at Stanford University, then, on early 90’s cryptographers have discussed a lot on how they can develop the original idea and make an accessible usage out of that, but they couldn’t do anything, until the mysterious “Satoshi Nakamoto” came along, and changed the path of mankind!
No one knows Satoshi’s real identity, he/she might be one person, a group or even Alien , the blockchain as we know it today, was created by Nakamoto.
BTW, Bitcoin is a system, which was built on Blockchain!
On October 2008, Nakamoto published a paper on the cryptography mailing list at (metzdowd.com) that contains the description of his digital currency called “Bitcoin: A peer to peer electronic cash system” . You can download his original paper here:
https://bitcoin.org/bitcoin.pdf
What is so special about Blockchain?
It's decentralized: the current internet that we use today, is mostly centralized, means the second that we connect to it, every personal data we use, such as Search results, bank account information, passwords etc. Will be stored on a “Data Base” in massive data centers.
Besides that, they’ve also keep this private data, in order to sell it, or other uses like improving their development process!
The Blockchain meanwhile, is a decentralized system, means that the data lives ONLY in the network, instead of one place, which means that no one can store and keep these valuable information.
What problems can Blockchain fix?
What’s wrong with the current situation of the world? Following, We will highlight a few problems that Blockchain have the potential to fix:
The problem with centralized databases:
- Security: if these centralized databases get hacked, the hacker can access all of the data at once! Since they are all in one place. We have seen that happened before, and it's happening more and more.
- Cost: building these kind of systems are often expensive. companies need to make their systems work smoothly, in order to do that, they have to provide a massive digital capacity, which means they need bigger servers and the cost will rise with it! Think of Google and its immense data centers.
- Your data: in these kind of systems, you don’t have the full ownership of your data and networks often use your data to make more money, without your permission!
- Transparency: we are living in a century where data is worth more than gold! So, it's important that we have the permission to know, how our information is getting used, by whom and for what reason! The decentralized internet can help us achieve that and make the world Brighter.
Why else is Blokchain so special?
- Blockchain is a trustless system: only on 2017, there were 1.66 Billion people who have purchased their goods online in the whole world, and it is expanding everyday! But, the thing is, when we buy something online, there are couple of actors we have to trust, could be the seller, payment system or websites! Too many actors will lead to more scam potential! On the other hand, a blockchain doesn’t require so much trust, it allows anyone to exchange goods or services directly with each other, without other actors or third parties!
- No more middleman: many networks today, are controlled by agencies or middlemen, they charge networks for the flow of information, but in a blockchain, there is no middleman, which leads to lower cost and faster transaction processing.
- Transparency: in a public blockchain like Bitcoin or Ethereum (public means anyone can join the system), anyone can see the transactions! So, it's definitely easier to track the flow of every transaction in this network.
- No one has the authority: since blockchain is decentralized, and things can change ONLY via consensus, no one can control the system, whether be it a person, a group or of course and Alien!
- Blockchain is immutable: therefore very difficult to hack, alter or change and hence very difficult to breach or to manipulate.
What are the applications of Blockchain?
- Energy: swapping energy directly person to person, without geographical limitations.
- Supply Chains: track all sorts of transportation, shipping and handling with complete transparency, connecting records as items passing across different handlers.
- Open data marketplace: massive open source platforms to exchange big data anonymously, as you know, Data is the lifeblood of internet based businesses.
- Governments: blockchain technology could be used to increase the speed and transparency in the public sectors like elections, parliaments etc.
- Auditing and regulating: blockchain technology could be used and setup to be a looking glass into public transactions, which makes regulation process of making rules, much more easier and faster to do.
- Insurance: it could make this industry more transparent with setting conditions for payments.
- The internet of things (IoT): connecting smart devices to internet and sharing economy.
What are Cryptocurrencies?
Cryptocurrency is a type of digital currency, which uses cryptography protocols to adjust and regulate on how people transfer these currencies, How they are created and their security. The first successful of its kind was Bitcoin (BTC).
The most important thing about cryptocurrencies is that there is no central authority! Whether be governments or banks.
What are some cool facts about Cryptocurrency?
- Cryptocurrencies are digital: there is no physical form for cryptocurrencies, they are completely digital and native to the internet.
- Bitcoin begins it all: the very first and widely adopted cryptocurrency was Bitcoin.
- They use a distributed ledger: all transactions in cryptocurrencies are stored on a global list (ledger), means that records are stored in many places at once.
- Cryptocurrencies are different: the generation of new units (block or coin) on most of the currencies is through the mining process, where individuals or groups try to solve cryptography puzzles and get rewards for their effort (usage of energy).
- Decentralized: cryptocurrencies are not in one place, they circulate across the network made up by nodes.
What is so special about Cryptocurrencies?
- They are anonymous (sort of): cryptocurrencies can be designed to be anonymous, which means no one can see your identity or what you are spending your crypto on!
- They are not controlled by governments: governments CAN NOT manipulate cryptocurrencies as they want, so, people in unstable countries (unstable economy) where currencies are volatile, can use cryptocurrencies as an alternative way to buy goods!
- They are borderless: just like the internet, cryptocurrencies can go anywhere (even on mars into Elon Musk’s wallet)
- They are secure: the distributed ledgers are very hard to hack.
- Lower transaction fee: some cryptocurrencies have fees on their transactions, but they are still cheaper than bank fees for moving paper money across borders.
- They can be used for contracts: cryptocurrencies are not just a form of money, they can be used to manage smart contracts between two parties or transfer resources which was difficult to do before.
Before the invention of Bitcoin, there were some unsuccessful examples of a decentralized service, which were built on the same idea of blockchain (peer to peer transactions), like Limewire and Nopster, but, those projects weren’t sophisticated, technologically advanced or as secure as Bitcoin's blockchain.
