Blockchain Technology is the main building element of Bitcoin and most others cryptocurrencies. The blockchain Technology is like the engine of a car, without “engine” network cannot work. For each P2P network, It is necessary to set up the system, how computers (users) communicate between each other. The solution has been brought by Blockchain Technology, which provides distribution of information inside the network between users.
The Blockchain Technology can easily be compared with peer to peer sharing files, otherwise known as Torrents. If you are downloading a Torrent file, it is just individual parts of a file from a group of people. The whole idea of Torrent is that users can share parts of files between each other without any third party. This idea was transferred to the payment system and thanks to the blockchain technology, it was become the reality.
Every machine (network) needs a system that makes it work.
A Blockchain network works like a growing list of records (blocks), where each block contains data about transactions. Blocks with transaction data is stored in a public ledger. All data in a network is decentralized, because it is placed on the internet. So, no one can delete, edit or disable network. Generally, Blockchain Technology solves, how information can be logically distributed inside the network.
Communication in the network provides Blocks, which are linked to each other and secured by cryptography. So, each block contains information (hash) from the preceding one and the actual block will be linked to the next future block. This creates a series of growing blocks, which are connected to each other.
Blocks in blockchain network
It is also necessary to mention, that every block must be verified, that it is real and it is not a fake block. Verification is provided by the miners, who verify each block by solving a mathematical puzzle through computing power. A reward is given to the first miner, who solves the block puzzle. Miners are using special mining PC, which is designed to create maximum mining power. Miners are rewarded for their service by a transaction fee. Block verification works on the system called Proof of Work.
Block verification
Thanks to Blockchain Technology, transactions on the network can be operated peer to peer without any third party. In general, you can image blockchain network like a public ledger, where users can directly exchange information between each other.
There are only miners, which provide the verification of blocks in the network. Miners verify transactions by looking at the ledger and checking for double spends etc. So, anyone can become a miner. Miners are rewarded by transaction fees from users of the network. The only problem can be, if a group of miners make the decision, that they want to verify blocks another system. This situation, where group of miners decide to switch to another system, is called Hardfork.
Decentralized public ledger
The first description of the cryptographically secured chain of blocks was in 1991 by Stuart Haber and W. Scott Stornetta. But the first real use of Blockchain Technology was in Bitcoin. Bitcoin is peer to peer Blockchain payment network, where users can exchange value (currency unit) between each other. Bitcoin was first described in 2008 and deployed to the internet in 2009 by the anonymous person called Satoshi Nakomoto. Satoshi described the entire technology of Bitcoin in his whitepaper. Bitcoin is completely based on the blockchain technology, secured by Proof of Work protocol.
As a result of growing popularity of Bitcoin, others started to research possible usage. Today, almost all cryptocurrencies work on Blockchain Technology. Blockchain Technology is probably most verified way, how you can run peer to peer networks. You can look on Coinmarketcap, where is the list of all currencies sorted by market capitalization. Alternatively, one project Called IOTA started using the Tangle technology in their network, which is completely different Technology from Bitcoin.
Thanks to the growing popularity of Bitcoin, it has increased the amount of electricity consumption. Verification of blocks in Bitcoin is based on Proof of Work. You can look at Bitcoin electricity index, where you can see growing electricity consumption in the network. Bitcoin electricity consumption is comparable to some states. As a result of this situation, the community has started work on the solution called Proof of Stake, where transactions being verified are verifying without electrical consumption.
The blockchain Technology is probably most proven way, how some systems can securely exchange information between computer users. Developers can use blockchain technology like the core system in an App. Once the application is created, a programmer can easily add a user interface and the Blockchain app is ready for mass-use. For example, App can be defined by smart contracts, which can create strict conditions. In the end, the future see the use of Blockchain Technology and people won’t know about it.
Layers of Blockchain app
Bitcoin is an example of the payment network, where users exchanging piece of code, which represents value. But you can exchange different types of information in a network like personal data, contracts or computing power. In conclusion, the possibilities of use are unlimited and development progress is very interesting. Here you can Explore interesting projects in the crypto world, just see on our sectors Cryptocurrencies, Financial services, Data storage, Cloud computing, Prediction markets and others.
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