Blockchain is one of the biggest buzzwords in technology right now.The first major application of blockchain technology was bitcoin which was released in 2009. Bitcoin is a cryptocurrency and the blockchain is the technology that underpins it. A cryptocurrency refers to a digital coin that runs on a blockchain.
The bitcoin blockchain
The blockchain behind bitcoin is a public ledger of every transaction that has taken place. It cannot be tampered with or changed retrospectively. Advocates of the technology say this makes bitcoin transactions secure and safer than current systems.
So here are a few facts about bitcoin:
- It is not issued by a central authority.
- There is a limit of 21 million.
- Currently just over 17 million are in circulation.
- The first transaction using bitcoin is widely believed to be carried out by a programmer named Laszlo Hanyecz, who spent 10,000 bitcoin on two Papa John’s pizzas in 2010.
- The identity of bitcoin creator Satoshi Nakamoto remains a mystery.
- Bitcoin has often been used to buy illicit products such as drugs
How does it work?
The bitcoin blockchain is “decentralized,” meaning it is not controlled by one central authority.While traditional currencies are issued by central banks, bitcoin has no central authority. Instead, the bitcoin blockchain is maintained by a network of people known as miners.These “miners,” sometimes called “nodes” on the network, are people running purpose-built computers that are actually competing to solve complex mathematical problems in order to make a transaction go through.
For example, say lots of people are making bitcoin transactions. Each transaction originates from a wallet which has a “private key.” This is a digital signature and provides mathematical proof that the transaction has come from the owner of the wallet.
Now imagine lots of transactions are taking place across the world. These individual transactions are grouped together into a block, organized by strict cryptographic rules. The block is sent out to the bitcoin network, which are made up of people running high-powered computers. These computers compete to validate the transactions by trying to solve complex mathematical puzzles.
The winner receives an award in bitcoin.This validated block is then added onto previous blocks creating a chain of blocks called a blockchain.
What other blockchains are there?
The bitcoin blockchain is not really made for companies to build apps and processes on. But a number of other companies have created blockchain platforms to help firms interested in the technology build processes.
Ethereum, Ripple, Hyperledger, IBM, R3, are just a few names that have developed such platforms.
Ethereum is essentially a blockchain platform that specializes in smart contracts. It has a digital coin known as ether linked to it. This is the world’s second-largest cryptocurrency by value. Like bitcoin’s blockchain, Ethereum’s is also public. Think of how companies like Apple and Google release software developer kits to allow people to build apps on their various platforms. Ethereum does something similar, allowing people to build “decentralized apps” on its platform, leveraging its blockchain and potentially using the digital coin ether to power their product.