Introduction to Blockchain|Cryptocurrency Explained
Posted by Carmen Zanfir
September 25, 2017

9 of 10 Facebook posts talk about Blockchain and Bitcoin. Google News are about Cryptocurrency and Blockchain technology. On news you will see titles like “Who’s the youngest Bitcoin millionaire?” and so on. It is obvious that Cryptocurrency, Bitcoin and Blockchain are the new interesting subject to talk about. But it’s not just something that is interesting and that’s all. It’s more about the fact that Cryptocurrency system and Blockchain technology is so interesting to explore and to find out how it really works.

 

As I said in my previous article – Introduction to Bitcoin – there will be a series of articles about Bitcoin, Blockchain and Cryptocurrency that are made to explain better this technology.

 

The first article was about Bitcoin and I explained to you what is a Bitcoin, how the Bitcoin Wallets work and what are the benefits for Bitcoin transactions. If we remember, there was a definition for Blockchain. I will go to my previous article and I will give you, again, the definition for Blockchain. And this is the point from where we will start our journey through Blockchain world.

 

What is Blockchain?

 

According to Wikipedia, the blockchain is like a distributed database – to achieve independent verification of the chain of ownership of any and every Bitcoin amount, each network node stores its own copy of the blockchain.

 

Investopedia says that

A blockchain is a public ledger of all cryptocurrency transactions that have ever been executed. It is constantly growing as ‘completed’ blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order. Each node (computer connected to the Bitcoin network using a client that performs the task of validating and relaying transactions) gets a copy of the blockchain, which gets downloaded automatically upon joining the Bitcoin network. The blockchain has complete information about the addresses and their balances right from the genesis block to the most recently completed block.

 

Now we are clear about what Blockchain is, let me remind you what Bitcoin and Cryptocurrency are.

 

What is Bitcoin?

 

Bitcoin is actually a digital coin. Bitcoin was created in 2009 and is operated by a decentralized authority, since the system works without a central repository or single administrator.



Bitcoin was invented by an unknown group of programmers called Satoshi Nakamoto. We don’t know if this is a real man or a team that worked to invent what we call now the coin of the future.

 

You cand read more about Bitcoin in our article here.

 

What is Cryptocurrency?

 

Cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its most endearing allure is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.

 

 

blockchain
Source: relativelyinteresting.com

 

 

History of the Blockchain

 

The first time when somebody worked on a cryptographically secured chain of blocks happened in 1991 by Stuart Haber and W. Scott Stornetta. In 1992, Bayer, Haber and Stornetta came up with the Merkle trees idea to be incorporated in the Blockchain technology. This will let the blockchain technology to collect blocks and information into a secure place.

 

The words “block” and “chain” were used separately first time in the whitepaper of Satoshi Nakamoto in 2008. When the term moved into wider use it transformed into Blockchain. That was happened last year, in 2016.

 

In August 2014 Bitcoin Blockchain file size reached 20 GB. In January 205 it reached 30 GB and from January 2017 till January 2017 it reached 100 GB.

 

When 2014 hit, they were talking about Blockchain 2.0. About this, I will talk later in this article.

 

In 2016, the central securities depository of the Russian Federation announced a pilot project based on Nxt Blockchain 2.0 platform that would explore the use of the Blockchain-based automated voting system. In July, IBM opened a Blockchain innovation research center in Singapore.

 

In early 2017, the Harvard Business Review suggested that Blockchain is a foundational technology and thus has the potential to create new foundations for our economic and social systems. It further observed that while foundational innovations can have an enormous impact, “It will take decades for blockchain to seep into our economic and social infrastructure.” – said Harvard Business Review 

 

What is decentralization?

 

The main goal of Blockchain is to facilitate secure online transactions. A Blockchain is a decentralized distributed digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network.

 

Decentralization: by storing data across its network, the Blockchain eliminates the risks that come with data being held centrally.

 

According to Wikipedia: “Decentralised blockchains may use ad-hoc message passing and distributed networking. Its network lacks centralized points of vulnerability that computer crackers can exploit or any central point of failure. Blockchain security methods include the use of public-key cryptography. A public key (a long, random-looking string of numbers) is an address on the blockchain.

 

Value tokens sent across the network are recorded as belonging to that address. A private key is like a password that gives its owner access to their digital assets or otherwise interacts with the various capabilities that blockchains now support. Data stored on the blockchain is generally considered incorruptible.”

 

What are opened Blockchains?

 

When we talk about opened Blockchains, we talk about a chain that anyone can read. Anyone can make legitimate changes and anyone can write a new block into the chain. But if they don’t follow the rules for writing new block into the chain, they will not succeed in this process.

 

What are permissioned Blockchains?

 

Even though, opened and permissioned seem to be the same thing, in reality they are not. When something is open, you don’t have to request access or to ask if you have the permission.

 

Permissioned Blockchains require permission to be read by the others. This limit the parties that make transactions on the Blockchain and the parties. Permissioned Blockchains also can set who can come into the network to write new blocks.

 

What are private Blockchains?

 

According to IBM, “A private blockchain network requires an invitation and must be validated by either the network starter or by a set of rules put in place by the network starter. Businesses who set up a private blockchain, will generally set up a permissioned network. This places restrictions on who is allowed to participate in the network, and only in certain transactions. Participants need to obtain an invitation or permission to join. The access control mechanism could vary: existing participants could decide future entrants; a regulatory authority could issue licenses for participation; or a consortium could make the decisions instead. Once an entity has joined the network, it will play a role in maintaining the blockchain in a decentralized manner.”

 

 

Blockchain
Source: letstalkpayments.com

 

 

 

 

 

 

Where does Blockchain can be used?

 

Blockchain can be used a system of record. You can use it in:

1 – Digital Identity;

2 – Tokenization;

3 – Inter-organizational data management;

4 – For governments;

5 – For financial institutes;

6 – For audit trails.

 

Also Blockchain can be used as a platform:

 

1 – For smart contracting;

2 – For automated governance;

3 – For markets;

4 – For automatic regulatory compliance.

 

Blockchain for IoT

 

IoT means Internet of Things. More exactly, IoT is the future of the internet. IoT is rapidly expanding all its potential, hence our everyday life will be completely changed. NetworkWorld says that:

 

This development is already taking place, however, he current server infrastructure and internet architecture is unlikely to be able to support the imminent IoT revolution. With so many devices connected to the internet, management and security are a concern. The servers will become overloaded and represent a single point of failure, making the system vulnerable to cyber-attack. A possible solution to this issue is blockchain technology, which is the distributed ledger behind virtual currencies, such as Bitcoin.

 

 

If there is provided a secured mesh network, Blockchain can deliver a platform for IoT to interconnect reliably and to avoid the possible threats that can plague the central servers.

 

In this moment, IoT is in charge of collecting data, remote monitoring, and device automation.

 

What is Blockchain 2.0?

 

The Blockchain 2.0 is an evolution of the protocol that includes:

  • exchange transactions and code the form of Smart Contracts;
  • developers are allowed to build programs and APIs on the Blockchain Protocols – the programs can be entrusted with money.

 

Smart Contracts are programs that encode certain conditions and outcomes like if there is a transaction between two parties, the program can simply verify if the product or service has been sent by the supplier. Only after this verification the sum will be transfered to the supplier’s account.

 

Blockchain

 

Conclusion

 

A blockchain is a public ledger of all cryptocurrency transactions that have ever been executed. It is constantly growing as ‘completed’ blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order. Each node (computer connected to the Bitcoin network using a client that performs the task of validating and relaying transactions) gets a copy of the blockchain, which gets downloaded automatically upon joining the Bitcoin network. The blockchain has complete information about the addresses and their balances right from the genesis block to the most recently completed block.

 

According to Wikipedia,

 

By 2014, “Blockchain 2.0” was a term referring to new applications of the distributed blockchain database. The Economist described one implementation of this second-generation programmable blockchain as coming with “a programming language that allows users to write more sophisticated smart contracts, thus creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reach a certain level.”

 

Blockchain 2.0 technologies go beyond transactions and enable “exchange of value without powerful intermediaries acting as arbiters of money and information”. They are expected to enable excluded people to enter the global economy, enable the protection of privacy and people to “monetize their own information”, and provide the capability to ensure creators are compensated for their intellectual property.

 

Second-generation blockchain technology makes it possible to store an individual’s “persistent digital ID and persona” and are providing an avenue to help solve the problem of social inequality by “the way wealth is distributed.”

 

Blockchain can be used as a platform:

 

1 – For smart contracting;

2 – For automated governance;

3 – For markets;

4 – For automatic regulatory compliance.

 

Blockchain

 

 

 

 

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