What is a blockchain?
A blockchain is a sort of database that is distributed among many computers that are called nodes, it stores information in digital formats as they are known in the cryptocurrency space, that is for its main innovation idea that it secures records of data and creates trust without needing a third party.
What’s the difference between a blockchain and databases?
A key difference is the way the data is being stored, a blockchain groups data together in “blocks”, each block has certain storage capacities that are locked when filled, and get linked to the previous block, forming a chain of data, that’s where the name “blockchain” comes from!
The databases usually store their data in tables, unlike blockchains that use blocks for storage,
How does blockchain work?
The main purpose of blockchains is to allow the recording of digital information, but not edit them, this makes the blockchain system immutable and super secure, its also (for this reason) called distributed ledger technology (DLT)
When was the blockchain concept created?
It was first introduced as a research paper in 1991, but the idea was widespread after its most famous application In cryptocurrencies and Bitcoin,
What is the transaction process?
First, a new transaction is entered
It gets submitted to the blockchain peer-to-peer computers (nodes) all over the world.
These computers then try their best to solve the transaction riddle to confirm it
Once confirmed the transaction gets clustered in blocks then inimitably grouped chained together
Then the transaction is completed!
How is the blockchain secured?
The blockchain is such a piece of technology that has many ways to achieve security and trust, first, the blocks are stored chronologically and get added to the end of the blockchain, which means its extremely difficult to go and change the contents of the blocks,
Okay let’s say a hacker, who also is an owner of a node in the blockchain system, wants to change the blockchain history and steal from people’s wallets, they would need to change their own copy of the history of the blockchain along with every node owner’s copy in the world, you can see how impossible this gets to change even 1% of the copies, as they would need to change at least 51% of them,
Bitcoin vs Blockchain
As mentioned before, the blockchain is the concept of a system that’s fully peer-to-peer, without needing any third party.
The bitcoin protocol is built on a blockchain, in fact, it is the blockchain’s first and most famous application.
Blockchain vs Banks
There are many key differences, such as:
- Time open: blockchain is open 24/7, 365 days a year,
- Truncation fees: blockchain truncation fees are determined by miners and users, the fees can be free of up to 50$.
- Truncation speed: bitcoin truncations can take as little as 15minutes, or even in seconds in other blockchain protocols, unlike bank transactions that would take 24-48h or even more.
- Know your customer (KYC): Banks require customer identification before opening an account, blockchain wallets can be created anywhere anytime and by anyone (or anything).
- Security: as discussed above the blockchain transactions are super secure thanks to its immutability.