BLOCK CHAIN TECHNOLOGY

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What is blockchain?

A blockchain is a distributed database that is shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format. Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin, for maintaining a secure and decentralized record of transactions. The innovation with a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.


One key difference between a typical database and a blockchain is how the data is structured. A blockchain collects information together in groups, known as blocks, that hold sets of information. Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block, forming a chain of data known as the blockchain. All new information that follows that freshly added block is compiled into a newly formed block that will then also be added to the chain once filled.

A database usually structures its data into tables, whereas a blockchain, like its name implies, structures its data into chunks (blocks) that are strung together. This data structure inherently makes an irreversible time line of data when implemented in a decentralized nature. When a block is filled, it is set in stone and becomes a part of this time line. Each block in the chain is given an exact time stamp when it is added to the chain.

KEY TAKEAWAYS

  • Blockchain is a type of shared database that differs from a typical database in the way that it stores information; blockchains store data in blocks that are then linked together via cryptography.
  • As new data comes in, it is entered into a fresh block. Once the block is filled with data, it is chained onto the previous block, which makes the data chained together in chronological order.
  • Different types of information can be stored on a blockchain, but the most common use so far has been as a ledger for transactions. 
  • In Bitcoin’s case, blockchain is used in a decentralized way so that no single person or group has control—rather, all users collectively retain control.
  • Decentralized blockchains are immutable, which means that the data entered is irreversible. For Bitcoin, this means that transactions are permanently recorded and viewable to anyone.

How Does a Blockchain Work?

The goal of blockchain is to allow digital information to be recorded and distributed, but not edited. In this way, a blockchain is the foundation for immutable ledgers, or records of transactions that cannot be altered, deleted, or destroyed. This is why blockchains are also known as a distributed ledger technology (DLT).

OVERVIEW
what is blockchain technology
BLOCKCHAIN IS MOST SIMPLY DEFINED AS A DECENTRALIZED, DISTRIBUTED LEDGER TECHNOLOGY THAT RECORDS THE PROVENANCE OF A DIGITAL ASSET.

What is Blockchain?

Blockchain, sometimes referred to as Distributed Ledger Technology (DLT), makes the history of any digital asset unalterable and transparent through the use of decentralization and cryptographic hashing.  

A simple analogy for understanding blockchain technology is a Google Doc. When we create a document and share it with a group of people, the document is distributed instead of copied or transferred. This creates a decentralized distribution chain that gives everyone access to the document at the same time. No one is locked out awaiting changes from another party, while all modifications to the doc are being recorded in real-time, making changes completely transparent.

Of course, blockchain is more complicated than a Google Doc, but the analogy is apt because it illustrates three critical ideas of the technology:


BLOCKCHAIN EXPLAINED: A QUICK OVERVIEW

A blockchain is a database that stores encrypted blocks of data then chains them together to form a chronological single-source-of-truth for the data

Digital assets are distributed instead of copied or transferred, creating an immutable record of an asset

The asset is decentralized, allowing full real-time access and transparency to the public

A transparent ledger of changes preserves integrity of the document, which creates trust in the asset.

Blockchain’s inherent security measures and public ledger make it a prime technology for almost every single sector

Blockchain is an especially promising and revolutionary technology because it helps reduce risk, stamps out fraud and brings transparency in a scalable way for myriad uses. 

Blockchain consists of three important concepts: blocks, nodes and miners.

Blocks

Every chain consists of multiple blocks and each block has three basic elements:

  • The data in the block.
  • A 32-bit whole number called a nonce. The nonce is randomly generated when a block is created, which then generates a block header hash. 
  • The hash is a 256-bit number wedded to the nonce. It must start with a huge number of zeroes (i.e., be extremely small).

When the first block of a chain is created, a nonce generates the cryptographic hash. The data in the block is considered signed and forever tied to the nonce and hash unless it is mined.  

Miners

Miners create new blocks on the chain through a process called mining.

In a blockchain every block has its own unique nonce and hash, but also references the hash of the previous block in the chain, so mining a block isn't easy, especially on large chains.

Miners use special software to solve the incredibly complex math problem of finding a nonce that generates an accepted hash. Because the nonce is only 32 bits and the hash is 256, there are roughly four billion possible nonce-hash combinations that must be mined before the right one is found. When that happens miners are said to have found the "golden nonce" and their block is added to the chain. 

Making a change to any block earlier in the chain requires re-mining not just the block with the change, but all of the blocks that come after. This is why it's extremely difficult to manipulate blockchain technology. Think of it as "safety in math" since finding golden nonces requires an enormous amount of time and computing power.

USES

blockchain uses cryptocurrency

Cryptocurrencies: The Beginning of Blockchain's Technological Rise

Blockchain’s most well-known use (and maybe most controversial) is in cryptocurrencies. Cryptocurrencies are digital currencies (or tokens), like Bitcoin, Ethereum or Litecoin, that can be used to buy goods and services. Just like a digital form of cash, crypto can be used to buy everything from your lunch to your next home. Unlike cash, crypto uses blockchain to act as both a public ledger and an enhanced cryptographic security system, so online transactions are always recorded and secured.

HOW DOES CRYPTOCURRENCY WORK?

Cryptocurrencies are digital currencies that use blockchain technology to record and secure every transaction. A cryptocurrency (for example, Bitcoin) can be used as a digital form of cash to pay for everything from everyday items to larger purchases like cars and homes. It can be bought using one of several digital wallets or trading platforms, then digitally transferred upon purchase of an item, with the blockchain recording the transaction and the new owner. The appeal of cryptocurrencies is that everything is recorded in a public ledger and secured using cryptography, making an irrefutable, timestamped and secure record of every payment. 

Beyond Bitcoin: Ethereum Blockchain

Originally created as the ultra-transparent ledger system for Bitcoin to operate on, blockchain has long been associated with cryptocurrency, but the technology's transparency and security has seen growing adoption in a number of areas, much of which can be traced back to the development of the Ethereum blockchain. 

In late 2013, Russian-Canadian developer Vitalik Buterin published a white paper that proposed a platform combining traditional blockchain functionality with one key difference: the execution of computer code. Thus, the Ethereum Project was born. 

Ethereum blockchain lets developers create sophisticated programs that can communicate with one another on the blockchain.

Tokens

Ethereum programmers can create tokens to represent any kind of digital asset, track its ownership and execute its functionality according to a set of programming instructions.

Tokens can be music files, contracts, concert tickets or even a patient's medical records. Most recently, Non-Fungible Tokens (NFTs) have become all the rage. NFTs are unique blockchain-based tokens that store digital media (like a video, music or art). Each NFT has the ability to verify authenticity, past history and sole ownership of the piece of digital media. NFTs have become wildly popular because they offer a new wave of digital creators the ability to buy and sell their creations, while getting proper credit and a fair share of profits.

Newfound uses for blockchain have broadened the potential of the ledger technology to permeate other sectors like media, government and identity security. Thousands of companies are currently researching and developing products and ecosystems that run entirely on the burgeoning technology.

Blockchain is challenging the current status quo of innovation by letting companies experiment with groundbreaking technology like peer-to-peer energy distribution or decentralized forms for news media. Much like the definition of blockchain, the uses for the ledger system will only evolve as technology evolves.

History of Blockchain

Although blockchain is a new technology, it already boasts a rich and interesting history. The following is a brief timeline of some of the most important and notable events in the development of blockchain. 


2008

Satoshi Nakamoto, a pseudonym for a person or group, publishes “Bitcoin: A Peer to Peer Electronic Cash System."

2009

The first successful Bitcoin (BTC) transaction occurs between computer scientist Hal Finney and the mysterious Satoshi Nakamoto.

2010

Florida-based programmer Laszlo Hanycez completes the first ever purchase using Bitcoin — two Papa John’s pizzas. Hanycez transferred 10,000 BTC’s, worth about $60 at the time. Today it's worth $80 million. 

The market cap of Bitcoin officially exceeds $1 million.

2011

1 BTC = $1USD, giving the cryptocurrency parity with the US dollar.

Electronic Frontier Foundation, Wikileaks and other organizations start accepting Bitcoin as donations.

2012

Blockchain and cryptocurrency are mentioned in popular television shows like The Good Wife, injecting blockchain into pop culture.

Bitcoin Magazine launched by early Bitcoin developer Vitalik Buterin.

2013

BTC market cap surpassed $1 billion.

Bitcoin reached $100/BTC for the first time.

Buterin publishes “Ethereum Project" paper suggesting that blockchain has other possibilities besides Bitcoin (e.g., smart contracts).

2014

Gaming company Zynga, The D Las Vegas Hotel and Overstock.com all start accepting Bitcoin as payment.

  • Buterin’s Ethereum Project is crowdfunded via an Initial Coin Offering (ICO) raising over $18 million in BTC and opening up new avenues for blockchain.
  • R3, a group of over 200 blockchain firms, is formed to discover new ways blockchain can be implemented in technology.
  • PayPal announces Bitcoin integration.

2015

  • Number of merchants accepting BTC exceeds 100,000.
  • NASDAQ and San-Francisco blockchain company Chain team up to test the technology for trading shares in private companies.

2016

  • Tech giant IBM announces a blockchain strategy for cloud-based business solutions.
  • The government of Japan recognizes the legitimacy of blockchain and cryptocurrencies.

2017

  • Bitcoin reaches $1,000/BTC for the first time.
  • Cryptocurrency market cap reaches $150 billion.
  • JP Morgan CEO Jamie Dimon says he believes in blockchain as a future technology, giving the ledger system a vote-of-confidence from Wall Street.
  • Bitcoin reaches its all-time high at $19,783.21/BTC.
  • Dubai announces its government will be blockchain-powered by 2020.

2018

  • Facebook commits to starting a blockchain group and also hints at the possibility of creating its own cryptocurrency.
  • IBM develops a blockchain-based banking platform with large banks like Citi and Barclays signing on.

2019

  • China’s President Ji Xinping publicly embraces blockchain as China’s central bank announces it is working on its own cryptocurrency
  • Twitter & Square CEO Jack Dorsey announces that Square will be hiring blockchain engineers to work on the company’sfuture crypto plans
  • The New York Stock Exchange (NYSE) announces the creation of Bakkt - a digital wallet company that includes crypto trading

2020

  • Bitcoin almost reaches $30,000 by the end of 2020
  • PayPal announces it will allow users to buy, sell and hold cryptocurrencies
  • The Bahamas becomes the world’s first country to launch its central bank digital currency, fittingly known as the “Sand Dollar”
  • Blockchain becomes a key player in the fight against COVID-19, mainly for securely storing medical research data and patient information

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