You may have heard various terms such as crypto coins, exchange platforms, and blockchain. For many, these words seem foreign. Why does something that goes by the name blockchain have to change the way we work online?
Just two years ago, Bitcoin experienced an unexpected boom and made a lot of people very happy. In only one month, its value almost tripled. People who already owned Bitcoin became millionaires.
As you can imagine, many would want to be on board in the hope of making a quick profit. Before anyone does, it is crucial to gain a better understanding of what Bitcoin is as well as all the other terminology we spoke about at the onset of this article.
One thing that Bitcoin isn’t is a commodity you can keep in your purse. You are not allowed to use it in the Supermarkets yet. We are also not talking about a physical coin that you can hold in your hand.
Most of you will be fully aware that it is a digital currency that can be mined through using computers that solve mathematical puzzles. All of this is made possible through blockchain technology.
Bitcoin may get all the attention, but the actual star of the show that makes it all possible is blockchain. Follow along to discover how it all pans out.
Let us take a closer look at blockchain and how it works as it is, after all, the basis on which cryptocurrencies get build.
You will find there are all sorts of uses for blockchain. Bitcoin as a cryptocurrency is just one of these.
The best way to explain blockchain is to look at it as a digital logbook in that it allows individuals and business owners to record all their digital transactions and assets. All these are stored across numerous devices. An asset refers to anything from a house, car, or even a copyrighted logo.
The blockchain gets shared between different users. The moment a new transaction enters it will be shared among multiple users and updated simultaneously. Every single transaction will be logged then tracked across an entire network of users. The information is set in stone and cannot be changed later on.
To gain a better understanding of what blockchain is all about, let us examine how it can be applied in the context of purchasing a house. The entire process involves numerous people. Let us begin with the builder, shall we?
He or she will obtain planning permission before erecting the house on the site. From here it will be registered with an address that will be connected to the electricity and water supplies and phone line. Once completed, the builder will look for a buyer. Ownership will be transferred in exchange for equity in the form of money.
Without blockchain, all the needed information would have been recorded by separate companies. Seeing that it will be all over the place, it will make it very time-consuming for the buyer to get hold of it all. Should there be any mistakes along the way, it will be even harder to assess where the error was made.
How Does a Blockchain Transaction Work?
The whole process is a little more complicated than it may seem.
This is how it works:
- A user within the blockchain will request a transaction to be made. The actual request is dispatched to a peer-to-peer network of computers. Each of the PCs is known as a node. Once the nodes have checked the user’s status, they would validate the transaction. Some of the machines on the network would act as mining machines and would, therefore, work on the deal to earn cryptocurrency.
- Any transaction that is verified would involve all sorts of data, from cryptocurrencies like Bitcoin to other relevant information. The info that is transferred would be combined with the verified info to create a new block of data. The new block would have a header that serves as a small piece of information that originates from the previous block in the chain. The very same block is then added to the remainder of the chain in a permanent form that can be edited.
- The entire transaction can take anywhere from 10 minutes to an hour to be completed. The time frame would depend on how many blocks there are. The original user would be notified once the transaction is done.
We hope the explanation given helps you understand blockchain technology better.