Blockchain explained! Here’s how to understand the blockchain & the technology behind Bitcoin & cryptocurrency.
A blockchain is essentially a super secure form of record-keeping. It’s made up of a list of digital transactions, information, data, or whatever else you can think of, that are grouped together in “blocks” then added to a row of past blocks to form a “chain,” hence the name “blockchain.” What powers the blockchain is a network of computers (or nodes) working together to verify each transaction & adding it to the chain of blocks so it’s viewable to the public & can’t be changed or edited retroactively. This makes it virtually impossible for human error to ever occur, therefore ensuring the blockchain’s long-lasting integrity. Blockchains operate autonomously, meaning they’re self-governed & their actions are carried out without any outside control or influence whatsoever. In the case of Bitcoin, it solves the problem of double-spending by ensuring that each unique transaction doesn’t occur more than once. Like I said earlier, data on the blockchain is resistant to any modifications. The only time it can be retroactively altered is when a majority of the computers in the network agree to let these modifications take place. But doing so consequently alters subsequent blocks. If I wanted to send you $1,000 using a traditional bank wire, I’d have to pay between $35-$45 in fees & wait between 3-5 business days for you to get your money. It’s because blockchain technology’s autonomous nature allows for transactions to take place directly from one person to another without the need for third-party services to regulate the transaction. It simply facilitates the transaction for cheaper & faster. It’s also extremely secure. Not only is its foundation based on cryptography, but its decentralized nature means there’s no single access point in which hackers can exploit it, making vulnerabilities within the system practically non-existent. Basing it in one specific location makes it “centralized.” Blockchains are “decentralized,” meaning their information is stored on thousands, if not, millions, of network computers all across the globe. Any hacker looking to taint the data would have to access each & every one of these computers at the same exact time! Ledgers based on blockchain technology are also open & public, making them easily verifiable. Anyone can view any transaction for any amount at any time, while still keeping user identity anonymous. Additionally, it’s designed to check in with itself in a sort of self-auditing manner. Satoshi Nakamoto was the first to conceptualize & implement blockchain technology when he introduced Bitcoin to the public. As I said before, the Bitcoin blockchain is upheld by a network of nodes that verify each & every transaction in a process as “mining.” Mining involves setting up a computer & connecting it to Bitcoin’s blockchain network using a client designed specifically for validating & relaying transactions. Once connected, the computer is automatically required to download a copy of the entire blockchain. It’s at this point that the computer can begin solving complex mathematical puzzles to verify transactions in a process called “proof-of-work.” Once a puzzle has been solved, the transaction is added into a block, a new copy of the ledger is distributed to the entire network, & the miner is rewarded with a certain amount of Bitcoin. Now, say you’ve sent me 1 BTC, the transaction has been verified, & it’s been added to the latest block; since then, another newer block has been created & added to the chain. It’s said that the block in which our transaction can be located is “1 block deep.” Most merchants & exchanges won’t consider the transaction confirmed until it’s 6 blocks deep or more. Doing so prevents any possibility of double-spending from occurring. These days, a new group of BTC transactions is accepted & formed into a block every 10 minutes on average. There are currently over 1,100 new cryptocurrencies available, most of which use different technology. Bitcoin’s primary function is a transfer of value directly from one person to another...but that’s just the tip of the iceberg. One such other cryptocurrency is Ethereum, which we’ll discuss in further detail later since it warrants its own video. To give you the gist of it though, Ethereum allows for smart contracts to function & also acts as a platform for developers to create & deploy other decentralized applications aka “Dapps.” Storj will take your photos, break each photo up into smaller files, encrypt each file for safety & security purposes, then distribute them to be stored across other hard drives within the Storj network.
Disclaimer: This is not financial advice. I absolve myself of all responsibility (directly or indirectly) for any damage, loss caused, alleged to be caused by, or in connection with the use of or reliance on any content, goods or services mentioned in this article. As usual, DYOR.