What is Blockchain?
In recent years there has been a new technology that has been making a splash in the investment world, blockchains being the core of that technology. Since the introduction of Bitcoin and other cryptocurrencies, many people are beginning and are wondering how exactly do these cryptocurrencies work? Well, cryptocurrencies are a reward given to miners (computers) who help create a new block in a blockchain. This blockchain is the entire reason that cryptocurrencies are exits.
A blockchain at its base is a distributed ledger developed using cryptography. A blockchain’s blocks are distributed, in the way that it is never completely stored on just one server. Rather the blockchain (ledger) is an openly community controlled system held by the public. There is no one person or government who controls the system. In fact, cryptocurrencies are commonly referred to as “The People’s Currency”. The block can be divided up and stored on any number of computers. Most of these computers do not know which blocks are stored on themselves, making finding the source of a single block very difficult. To be put in other words, a blockchain is a series of information blocks that are secured using a standard encryption method.
The best way to think of a block is to imagine it as a very complex puzzle that is a part of a series of complex mathematical puzzles. Now to solve these puzzles, there are special programs and computers, called miners that work together to solve the problems. When solved each block will contain some information and a reference to the last block. Date and Time stamps are provided and in some cases miscellaneous information is provided as well. Now, these puzzles are hard to solve and require a lot of energy and computing power to solve them. After solving the puzzle, a block becomes stored on a network of computers.
What is cryptography?
Cryptography is the practice of hiding information using a code or cipher. In the old days a cryptographer would hide secret messages using a cipher, protecting the message from prying eyes. In recent years cryptographers have exchanged their pens and papers for computers and algorithms. Like their predecessors, modern cryptographers encrypt sensitive information and the encrypted information becomes part of the block that makes up the blockchain.
Why are blockchains valuable?
A blockchain’s value comes from their security. Imagine that you want to store some important document or data but fear that it will become corrupted or manipulated. Well, blockchains are designed to stop that. This level of security, and the fact that a cryptocurrency such as Bitcoin is non-dilutive, allow it to have many layers of intrinsic value.
What kind of information does a blockchain store? The type and amount of data stored on a blockchain vary from one version to another. Some will allow for only minimal data, while others will allow for more data. This information then is distributed among a vast network of computers making the tampering or destruction of the data into a Herculean task (a task very hard to perform).
How can blockchains affect the future?
Blockchains are like any other disruptive technology. We know that it will change something, just not what. Imagine all of the things that will benefit from a near tamper-proof public ledger that is maintained by a community of people dedicated to it. There are already companies in the information security sector that are finding ways to uses blockchains to secure their client’s information. By understanding blockchain, it allows one to understand cryptography thereby having a greater knowledge base of the overall component and value of cryptocurrencies.