For the regular person, it’s easier to confuse bitcoin for Blockchain. In fact, most people, not active in the crypto space think that Bitcoin is the Blockchain when in fact Bitcoin is a Blockchain.
A majority of cryptocurrencies today came about after the emergence of Blockchain. Bitcoin, being a cryptocurrency itself, was the flagship project of the Blockchain technology. But this technology doesn’t apply to cryptocurrencies alone. There are other applications using the same framework.
Before we learn of other applications here are some basics of Blockchain.
What Is Blockchain?
Simple, Blockchain is a chain of blocks, each containing transactional information and data about the previous block in the same chain.
But in addition to the definition is the framework and components of the Blockchain framework. They consist of; a transaction, a wallet, signature, network, mempool, consensus hashing, block and Blockchain. These are some of the terms you should come across when learning more about Blockchain.
The History Behind Blockchain
You must have heard of Satoshi Nakamoto. He is the man, or woman (nobody really knows) behind the bitcoin. He successfully developed the cryptocurrency using Blockchain technology.
He did so with the idea of replacing the traditional, centralized banking system with the decentralized version.
Changing The Centralized Banking System
By being centralized means, the authority of control has been granted a single entity. Decentralization is the exact opposite. The authority of control has been distributed over the whole network such that there is no single entity that has complete authority.
The issue with the centralized system is that; when sending money, to a friend, for example, there must be a gateway to pass through before the money reaches your friend. The bank is the gateway. It’s already an inconvenience right?
The problem with the system is that; the bank is the intermediator between the two of you and all your transactions are recorded. In addition to the privacy inconvenience, you additionally incur transaction costs and there is a risk that your data may be stolen or lost.
And these are the issues bitcoin solves, with the help of Blockchain. Bitcoin is decentralized, and there is no central authority behind the system. Under the peer to peer network format, there is guaranteed privacy and there is no risk of losing data since the network is distributed.
The Peer to Peer Networks And How They Operate
Ever downloaded a movie from the internet using torrents? Torrents are the best example of peer to peer networks.
What torrents do is gather data pieces together from the computers using torrents (nodes/peers) and serve the requesting computer from the internet.
Torrents are decentralized, just like Blockchain. Now, when it comes to bitcoin, it uses the same p2p network, that’s why it’s decentralized. Transactions in the network are recorded to each node in the Blockchain network. Each node has a copy of all transactions in the entire network. New transactions also get updated to each node.
That’s the fundamental idea behind Blockchain and Bitcoin for that matter. But there is more than what meets the eye.