We have heard the terms like cryptocurrency, bitcoin, ethereum etc. Ever wondered what these all terms are related to and where these are used? So answer to this question is Blockchain!
First we need to understand what basically a blockchain is and then get into some details.
What is Blockchain?
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.
A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger. The decentralized database managed by multiple participants is known as Distributed Ledger Technology (DLT).
Blockchain is a type of DLT in which transactions are recorded with an immutable cryptographic signature called a hash.
This means if one block in one chain was changed, it would be immediately apparent it had been tampered with. If hackers wanted to corrupt a blockchain system, they would have to change every block in the chain, across all of the distributed versions of the chain.
History of Blockchain
Although blockchain is a kind of new technology but it already have a rich and interesting history. Below is the timeline of some most important and notable events in blockchain development.
2008 : Satoshi Nakamoto publishes Bitcoin : A peer to peer electronic cash system.
2009 : First successful bitcoin transaction between computer scientist Hal Finney and Satoshi Nakamoto.
2010 : Florida-based programmer Laszlo Hanycez completes the first ever purchase using Bitcoin.
2011 : Electronic Frontier Foundation, Wikileaks and other organizations start accepting Bitcoin as donations.
2012 : Bitcoin Magazine launched by early Bitcoin developer Vitalik Buterin.
2013 : BTC market cap surpassed $1 billion. Bitcoin reached $100/BTC for first time.
Buterin publishes “Ethereum Project" paper suggesting that blockchain has other possibilities besides Bitcoin.
2014 : 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.
2015 : 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.
2017 : Bitcoin reaches $1,000/BTC for 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.
2018 : IBM develops a blockchain-based banking platform with large banks like Citi and Barclays signing on.
How Blockchain Works?
Blockchain consists of three important concepts: blocks, nodes and miners.
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 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.
When a block is successfully mined, the change is accepted by all of the nodes on the network and the miner gets a financial reward.
One of the most important concepts in blockchain technology is decentralization. No one computer or organization can own the chain. Instead, it is a distributed ledger via the nodes connected to the chain. Nodes can be any kind of electronic device that maintains copies of the blockchain and keeps the network functioning.
Every node has its own copy of the blockchain and the network must algorithmically approve any newly mined block for the chain to be updated, trusted and verified. Since blockchains are transparent, every action in the ledger can be easily checked and viewed. Each participant is given a unique alphanumeric identification number that shows their transactions.
Combining public information with a system of checks-and-balances helps the blockchain maintain integrity and creates trust among users. Essentially, blockchains can be thought of as the scalability of trust via technology.
How blockchain evolved from Bitcoin to Ethereum?
Originally created as the ultra transparent ledger system for a 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 was born.
Ethereum blockchain lets developers create sophisticated programs that can communicate with one another on the blockchain.
That's all from my side community! I hope that you have gained a slight idea of blockchain technology. I encourage you to get more insights of this technology.