Education
The History of Blochchain Technology
What is Blockchain?
From the name “Blockchain” you can decipher what Blockchain is.
That’s right. As the name suggests, Blockchain simply is a chain of blocks. The blocks here act as ledgers that are distributed among the ones involved in the chain or network.
For Example:
Imagine you want to send your friend (John) who lives abroad some cash. You’ve learned that with the normal way of sending some cash, there are possibilities that there will be issues when transacting.
Depending on the amount you want to send John, you’ll incur some transaction charges (and the charges are often high). There’s also a possibility of a hacker intercepting your transactions and running off with your money.
There’s also a chance where the transaction will take more than a day before it’s completed. Because you know all the repercussions involved in using a decentralized banking system, you decided to use a Blockchain-based banking system.
You know all the perks that come with using Blockchain technology in transactions… You know it’s fast, more secure, and almost impossible to hack.
How Blockchain works
When you send John some cash, your transaction details are recorded in a block. This block includes the total amount you have in your account. To complete the transaction, you’ll need John’s public key (think of it as his email address).
Here’s how the transaction process works:
Let’s say you’re sending $1,000 to John. To initiate the transaction, you’ll need his public key (account address). The amount you want to send is then hashed or encrypted using a hashing algorithm, along with a digital signature generated from your private key.
For the transaction to be valid, you must have an amount that is equal to or greater than what you intend to send. If the amount is less than what you want to send, the transaction will be flagged and marked as invalid.
The hashing and encryption of your transaction details ensure that no hacker can decipher the information and steal the money. This hashing function is what makes Blockchain secure and nearly hack-proof.
For John to receive the $1,000, the transaction must undergo a verification process known as mining. Mining is a process in which computers, called miners, solve complex mathematical problems to add a verified block to the blockchain.
To complete and verify the transaction, it must meet a set of predefined conditions, measured by what is called a Nonce value.
Using his private key, John decrypts your hashed data and receives the $1,000 in his wallet account. After the transaction is verified and marked as complete on the Blockchain, both you and John receive a copy of the transaction details.
These details also include the amount each of you currently has in your accounts. This transparency is a key feature of Blockchain. The copies you and John receive are part of what’s known as a decentralized ledger. Anyone who joins your transaction network will also receive copies of everyone’s transaction details within this Blockchain network.
Populer Commodities on Blockchain
What is Bitcoin?
Bitcoin, as the name suggests, is an electronic currency. Unlike government-issued currencies, there is no single entity that issues it or controls the processing of its transactions. Before Bitcoin, it was impossible to make electronic payments without relying on a third party, such as a bank or payment processor. Payments were often slow, expensive, and not accessible to everyone.
Bitcoin was created to solve this problem by operating without a trusted third party. Instead, it functions as a purely peer-to-peer electronic currency, meaning that payments are sent directly from one person to another.
How does it work?
Simply put, computers all over the world use mathematical functions to independently verify Bitcoin transactions. These transactions are then added to a public, permanent list called the blockchain. The blockchain is stored on all these computers, serving as a secure, universal record of ownership.
In Bitcoin's early history, there were very few transactions being processed by the network. However, as more people began using Bitcoin, the number of transactions increased. Eventually, the Bitcoin network needed to be updated to keep transactions fast, cheap, and reliable.
However, there was no consensus on how this update should be performed or even if it should be implemented at all. As a result, Bitcoin had to split into two separate currencies to accommodate the update.
The version that implemented the originally planned update is called Bitcoin Cash, listed on exchanges with the ticker symbol BCH. Bitcoin Cash can currently process over 100 transactions per second, with fees reliably less than a penny per transaction.
The other version, which made different updates to the network, retained the name Bitcoin and the original ticker symbol BTC. Bitcoin can only process between three and seven transactions per second and is now considered by many to be digital gold rather than digital cash. Its fees can range from several cents to tens of dollars per transaction, depending on the network's usage.
What is Ethereum?
Bitcoin was developed using a "Turing incomplete" language, which means it can only execute a limited set of commands, such as recording who sent how much money to whom. If you want to create a more complex system, you'd need a different programming language and, consequently, a different network of computers. Imagine you wanted to build your own decentralized program, similar to Bitcoin. To do this, you'd need to understand how Bitcoin's decentralization works, write code that mimics its behavior, and gather a large network of computers to run the code. This is a monumental task—enter Ethereum. Ethereum was first proposed in late 2013 and brought to life in 2014 by Vitalik Buterin, who was then the co-founder of Bitcoin Magazine. Ethereum is a do-it-yourself platform for decentralized programs, also known as Dapps (decentralized applications). If you want to create a decentralized application that no single person, including yourself, controls, all you need to do is learn the Ethereum programming language, Solidity, and start coding. The Ethereum platform runs on thousands of independent computers, making it fully decentralized. Once a program is deployed on the Ethereum network, these computers, known as nodes, ensure that it executes as intended. Ethereum serves as the infrastructure for running Dapps globally. It's not just a currency; it's a platform. The currency used to incentivize the network is called Ether. Ethereum's ultimate goal is to truly decentralize the internet. Ethereum allows people to connect directly with each other without the need for a central authority. It's a network of computers that, together, form a powerful decentralized supercomputer. Check out Ethereum's price prediction here.
What is an NFT?
NFT stands for Non-Fungible Token. The term "fungible" means that something can be exchanged or substituted and still hold the same value. It's interchangeable, like a dollar, gold, casino chips, Bitcoin, Ethereum, or frequent flyer loyalty points. For instance, if someone lends you $10 in cash, and you return two five-dollar bills, that would be acceptable because, even though the denominations are different, they hold the same total value—this is because they are fungible. On the other hand, "non-fungible" refers to an asset that cannot be substituted, as it has unique attributes that differentiate it from others in the same asset class. Examples of non-fungible assets include a painting, a theatre ticket, a house, a video game skin, a trademark, or a CryptoKitty, which was the first real use case to gain traction on the Ethereum blockchain in 2017. Some of these assets are physical and tangible, while others are digital and intangible. With that in mind, NFTs are non-fungible tokens. A token refers to a digital certificate stored on a secure, distributed database known as the blockchain. NFTs are digital assets that are publicly verifiable and represent intellectual property authenticated on a blockchain. A popular platform to browse a variety of NFTs is OpenSea (opensea.io).