Blockchain Concepts

Evening Hivers!

It may come as no surprise that the technology behind cryptocurrency is Blockchain. The latter technology has really taken off lately, and many of the new technologies that have emerged do not have blocks, such as Bitcoin, but each transaction is stored individually based on new protocols and new encryption technology. Regardless, Blockchain can be read as a database, the data stored on a Blockchain are cryptocurrency transactions. Take for example Bitcoin's Blockchain, here all transactions are open and accessible to everyone. This is the opposite of what most of the population is used to today - a centralized database run by a company or a government.

In the picture you can see a conceptualized Blockchain -

Some key concepts of Blockchain

Wallet: This is your bank account in the crypto world and are places where you keep your cryptocurrency. What sets all the wallets apart is roughly how accessible and secure the cryptocurrency is. With increased availability (warmer storage) security decreases, but then it is also faster for you to convert the cryptocurrency to fiat, if necessary. Colder storage is typically having the wallet secured and stored away on a hardware device, typically a memory stick. The latter is also much more secure than if you had a wallet stored easily available, typically on an exchange such as Coinbase / Binance (examples). Often a wallet consists of a “private key” and a “public key”. Such keys are made in hexadecimal code such as 345FJGRHDB342NGJHDBEEH432. Private key is one's password to enter the wallet and access the values. If the latter is lost, the values are also gone, so take good care of the private key. Save it on a USB memory chip and delete it from your computer, then your values/fortunes are very safe. In my opinion you should do so with your public key as well (Public key: your public address for people to send crypto to). Remember that once you have acquired a wallet, you are part of the blockchain network.

Transaction: A payment from one to another. For example, when a person is going to send Bitcoin to another person, it happens by going into the wallet and creating a transaction. You will need a person to send Bitcoin to your public key to receive Bitcoins. Provide him/her the public key, this can for instance be done by sending him/her your public key by mail or something similar. The public key also has the same hexadecimal string as the private key. Before the transaction is broadcast, it must go through a hashing, or a calculation if you want. Here the transaction is encrypted, and the data size of the transaction is reduced. A transaction made with Bitcoin represents 64 characters, 32 characters is the transaction itself and 32 characters is other information. This makes the transactions “super” secure. The transaction is posted in a "pool". There may be several thousand transactions waiting to be verified (mined) into a block.

Block: Simply put, this is a collection of transactions, often several thousand. The transactions are connected via mathematics, which means that the transactions that have already been approved (mined) cannot be changed. Each block is also associated with algorithms. This makes Blockchain as a database much more secure than other types of databases. In a “regular” database, you can delete a transaction – that is not possible on the Blockchain!

Mining: Mining could be a huge computer program that takes hold of transactions that are waiting in a "pool" and processes them in a giant algorithm, so that they end up in a block. This algorithm checks that the transaction is correct and that those who pay have money in their wallet. Those who verify / mine get bitcoin for the job. A miner is typically a computer company that has extremely much computing power. They often have large server parks and use a lot of power to mine crypto. You could of course mine yourself but in these times, it will probably cost more than it tastes.

Node: Each time a block is mined, it is sent to many computers that check that the block has been calculated correctly. If most of the nodes confirm that the block is OK, it is accepted. Then we have consensus. This is also the reason why it is very difficult to hack a blockchain.

Fork: Theoretically, this could mean that two miners solve the “mining riddle” at the same time, in the same millisecond, and manage to get consensus on the block. In such cases a fork occurs, only one of the blocks takes the next place in the chain, while the other block remains outside. One of the algorithms in the mining process in Bitcoin is that the next block will be added to the longest chain, which will always be the original. Thus, the longest chain continues to grow while those lying in a fork are kept out. Eventually, the transactions that are in the fork are recalled so that they get back into the right chain. This is because those who had transactions in the fork shall not suffer any damage.

Here one can see a conceptualized fork on the Blockchain

It is very likely that Blockchain will “sneak” into most industries, as the internet did. Remember that when the internet was launched around the mid 90's its purpose was to be able to send mail to each other. Blockchain started with something similar – sending transactions! Imagine what will become of Blockchain in 30 years! 😉

Write me some comments of what the “Cryptocosm” will look like in 10 years! It would be interesting to hear about your thoughts!

Cheers -Olebulls

Posted Using LeoFinance ^Beta