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Blockchain 101 - a summarised summary!

If you're interested in learning more about bitcoin's inner workings or any other cryptocurrency, learning about blockchains is a crucial first step. Blockchains, unlike some of the more abstract ideas surrounding digital currencies, can be explained in simple terms and grasped by everyone.

To begin, let's define a Blockchain.

Blockchains are a type of Distributed Ledger Technology (DLT) that, at first glance, may look like conventional databases but have important distinctions. Blockchains may be particularly successful in preventing dishonesty in a network by using the power of majority at scale consensus to provide strong incentives for all network users to continue to be honest. In a network where every transaction must be verified by a single individual, fraud has a much better chance of going undetected. However, as the size of the network expands, it becomes increasingly difficult to verify transactions with a decentralised army of chequers.

A Few of Blockchain's Many Perks

  • An increase in openness

  • Immutability (unable to modify history) (unable to change history)

  • More convenient authentication

  • The elimination of middlemen has resulted in cost savings.

  • Productivity Boost

  • It's decentralised and spread out.

Confidential Blockchains

Private blockchains have become more of a talking point as blockchain technology has attracted the attention of established industries. On the other hand, many of the advantages of DLT are lost in this approach, which is likely why adoption of such systems has been so low.

One may argue that the key advantages of a public blockchain are lost in a private blockchain, which is really just a centralised database. Hybrid blockchains may see improved designs in the future, but for the time being, the focus remains on public blockchain initiatives like Bitcoin.

Safety in the Blockchain

Traditional financial transactions might raise concerns about tampering with the past, but this is something that can be avoided using blockchain technology. It is harder to alter the past as more blocks are added to the chain. It is quite unlikely that a transaction may be undone after it has gotten a few confirmations, unless the majority of the network agrees to alter the blockchain. More so when the network grows in size.

Blockchains' distributed nature is one of its main advantages. One may try to impose their own version of the truth on the network by seizing control of at least 51% of the nodes, although this would be extremely difficult with larger networks because to the high costs and resources needed. Even if you were able to alter your copy of the ledger locally, you still wouldn't be able to do so without the consensus of the network, which is normally impossible. It's also probable that the rest of the network would notice if a significant modification were made to a blockchain via this assault, and they'd split away from the change, rendering your time and money wasted.

As there is no single source of truth or single point of failure, blockchains can be much safer than centralised databases. Before bitcoin, most attempts to launch digital money failed because they lacked decentralisation. While it's not hard to construct a basic digital currency, it is difficult to develop one that is trustworthy enough to be useful. Blockchain technology is what has allowed bitcoin and other cryptocurrencies to revolutionise the ways in which value can be transferred.

Using a blockchain paves the way for new kinds of transactions, shares, and exchanges that were previously impractical, if not impossible, to implement.

A Brief Introduction to Blockchain Nodes

A blockchain's nodes are crucial because they guarantee that there is no one centralised location for a copy of the ledger. The network's integrity is preserved by the nodes' ability to compare data. If you try to run a blockchain with only one computer, you'll end up with a central point of failure and something more like to a traditional database.

While some people opt to run nodes so they may verify their own transactions, the primary motivation for the majority of node operators is to help the network function smoothly. Dedicated bitcoin users often keep a complete node, or replica of the blockchain, on their personal computers. Nodes in a blockchain network are crucial because they ensure the network's reliability and authenticity, two factors of paramount importance.

Making a Blockchain Grow

Although not all blockchains rely on mining for their functionality, many do. Bitcoin is the most well-known blockchain that needs mining to create new blocks and add them to the chain. In order to earn rewards, miners are encouraged to verify and record transactions in blocks. In order to earn a reward for solving complicated mathematical problems and adding them to a blockchain, like Bitcoin, miners compete against one other. The value of this incentive varies from blockchain to blockchain. However, it is quite standard for blockchains that require mining to offer a reward, as this is necessary to motivate miners to maintain network security and expand the chain.

As soon as a solution is identified and a block is mined, the information may be broadcast to all of the connected devices. After the nodes verify that the transactions are valid according to the network's regulations, the process begins anew as miners attempt to solve the next block to be added to the chain. Proof-of-work blockchains leverage the effort put in to solving a block as a kind of security against forgery. Because of this method, it becomes more difficult to launch an attack on a blockchain in order to do a double spend or to alter the data stored on the blockchain in any other way.

Implementations of Blockchain Technology

Blockchains, because to their immutable nature, have several potential applications, including the storage of easily altered data, the management of transactions, the tracking of ownership, and many more.

To be sure, blockchain-based ownership verification has enabled more than merely the use of a censorship-resistant, financially stable medium of exchange. Nonetheless, technology has unleashed a plethora of possibilities, from the medical realm to the most specialised corners of the financial sector. Access new frontiers by combining the strength of a conventional database with the advantages of a decentralised, immutable blockchain. There is much to like about blockchains, and the use cases for them only seem to grow with time, from the ease with which millions of dollars in value can be sent around the world in moments for relatively tiny fees using bitcoin to the ability to own an NFT or participate in the world of DeFi (decentralised finance) using ethereum.

The term "blockchain" has entered the vernacular of the general public thanks to Bitcoin, but its potential applications are just beginning to be scratched. Start your education on bitcoin and other cryptocurrencies by reading some of our previous articles, but don't stop there; mastering the fundamentals of blockchain is an important first step.

This awesome article was inspired by gingerbreadfork on the LocalCoinSwap Academy

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