What is Blockchain?
Blockchain is the technology behind cryptocurrency and was originally designed to help create Bitcoin. Understanding the basics of Blockchain allows for a better understanding of cryptocurrencies as a whole. The easiest way to explain the workings of Blockchain, is to use the following analogy;
See it as if you are playing football with your friends 5v5.
Every player, in this analogy, should be viewed as an independent link in the Blockchain.
The football game starts and after a few minutes your team scores a goal.
All players agree on the goal being valid and the score being 1 – 0
The game moves on.
A little while later the keeper of the opposing team protests the goal and wants to adjust the score.
He goes on about how you were offside, that it didn’t count and claims that the score is still 0 – 0.
However, all other players team up and disagree, as they had already confirmed the goal.
They agree to ignore the disagreeing player and play on.
This is the basic idea behind inner Blockchain workings, a transaction is performed, checked by the other links and once its agreed upon that it was indeed a legitimate transaction, all links save a copy of this transaction.
This ensures that if 1 link would be compromised / hacked, it cannot adjust any info on the Blockchain as everyone else has a copy of the record.
Core values of Blockchain
One of the key things to know about Blockchain is that it was designed with the following three core values in mind:
Blockchain technology must be
- Distributed / Decentralized
- Safe and Transparency
- Anti-Government & Anti-Bank
Distributed / Decentralized
One way of imagining Blockchain is to view it as long chain link between many different computers all around the world. On this Blockchain, every purchase, sale and transfer of a certain cryptocurrency is recorded and saved. Because the Blockchain is spread over all these different computers around the world, it is considered a ‘’decentralized’’ ledger
(ledger = a collection of financial accounts).
The idea behind being decentralized, is that it is much safer as you have don’t have just 1 location where you store all data, but rather let all the connected computers have a copy of all the data.
Safe and Transparency
This decentralized ledger a.k.a. Blockchain, is publicly viewable for everyone. However, the only thing that you will find when viewing the Blockchain itself, are the wallet addresses and the amount of crypto coins in the wallet. It is impossible to see or find out who the wallet actually belongs too, making all the transactions and purchases completely anonymous.
Note: Wallet addresses (as can be viewed when looking at the Blockchain) consist of a random combination of letters and numbers, and is between 26 & 35 characters long.
So how safe is the Bitcoin Blockchain exactly? Well, to give an idea; the NSA tried to hack the BTC Blockchain for 6 months straight, 24 hours a day… and then gave up.
Not convinced? Let’s say that you’re a hacker and you want to hack the BTC Blockchain. In order to even think about pulling it off you would need to have more computer processing power than the Blockchain itself. However, having this amount of computing power is theoretically impossible as even Google, Facebook and Amazon combined would not be even meet the required amount.
Note: you might have heard news stories of Bitcoins being stolen or exchanges being hacked. Please refer to the ‘’Biggest Bitcoin Hacks’’ section for clarification on these cases.
Anti-Government & Anti-Bank
When a Blockchain consists of a lot of different computers / links in the Blockchain, transactions can go very fast. For example, the crypto coin DASH focusses having a fast transaction time between the sending and receiving of its coins, with the average transaction speed being 2.5 minutes no matter where you are in the world. Compare that to current day (international) transaction times between banks, which can take up to days!
By use of the Blockchain, people can safely send and receive funds from peer 2 peer, almost instantly, all while being completely anonymous. This is exactly what the creators of Blockchain intended. Doesn’t this sound good? Sending and receiving funds from people and never again having to pay the bank any transaction fees or waiting for a transaction to come through?
Uses for Blockchain
Now that we know the basic ideas and workings behind Blockchain technology, lets discuss how Blockchain can be used in the real world.
Most people will associate Blockchain with Bitcoin, as this was what Blockchain originally was designed for. But the possibilities now far exceed the idea of having to be only (crypto) currency related.
Over the past years Blockchain evolved and become more known as a manner in which one can safely and securely store data, with this Smart contracts were born.
Smart contracts can be used to exchange money, property, shares or anything else in a conflict-free way and by avoiding the services of a middleman e.g. bank, lawyer, or notary.
For example, if you want to buy a house you would need to go to a notary, pay them for the creation of the necessary paperwork and wait for the everything to go through. While a smart contract can do all this instantly and then some!
For example: If you would want to sell your house by use of a smart contract, you would upload the owner rights, set the terms, conditions, and requirements for purchase of the house and then followed by the price and penalties. Write is all down in smart contract and upload it onto the blockchain.
When another person wants to go ahead with the purchase of the house, he/she would have to upload all the required documents from his side (e.g. identification), pay the required amount in cryptocurrency. And voila! House sold!
There is no risk for either party as to being scammed, as the Blockchain technology ensures a fast and secure transaction.
The thing that makes smart contracts so good is the fact that they also enforce the rules and penalties, meaning if you made the down payment for the house, but decide later you don’t want to buy it, a penalty of X% (depending on how you create the contract of course) is kept instantly. This goes both ways, for the buyer and seller.
Imagine being able to sell your house in under 5 minutes and receiving the payment instantly, all while not paying any bank or notary fees.
Another example, Imagine you’re on a holiday in Thailand, you rented a motorcycle and are driving cross country exploring. Suddenly, a car pulls out in front of you and there’s no more time to stop. You crash.
The ambulance takes you to the hospital where the doctors must conduct emergency surgery, they need to know your blood type, allergies, and other essential information. But you don’t speak a word of Tai nor do they speak a word of English, or worse.. you could have lost consciousness.
If only there was a way you could provide them with all your required health information, in any language, instantly. This is where Blockchain can jump in.
Imagine wearing a bracelet / necklace with all your personal health information (encrypted), which only medical equipment can decrypt and view. This could save lives.
This is exactly what Blockchain company Medical Chain aims to accomplish.
The Blockchain Mystery
Lastly, one of the great remaining mysteries revolving around Blockchain and Bitcoin is the fact that the inventor / creator of Blockchain and Bitcoin is still anonymous. All that is known is his / her name: Satoshi Nakamoto. It is because of this name that the value of Bitcoin (and other cryptocurrencies) are expressed in Satoshi’s.
e.g. 100,000,000 Satoshi will always be equal to 1 Bitcoin, this is hardcoded in the Bitcoin design. You will often find other crypto currencies also expressing their value in Satoshi’s.