One day over coffee, a friend asked exactly what bitcoin and blockchain are. They knew it kept fluctuating in price and that you can use it to buy and sell things, but wanted to know more about how it is used and how it works.
Read on to find out more.
What is Blockchain?
A common explanation on its structure: blockchain is a decentralized, distributed public ledger that lives within the confines of users' computers. Each person or “peer” has access to view each of the transactions that are made on the public network. That’s part of what makes it so secure.
It's name gives a hint to its components. When people are referring to “Block-chain,” they are talking about digital information (block) that is stored in a public database (chain).
Why Are Bitcoin and Blockchain on the Rise?
In recent news, the bitcoin price has steadily increased along with other cryptocurrencies—digital money that has no physical coin or bill. You can buy cryptocurrency with a credit card or create it through a process called mining.
The increase has happened for a few different reasons, but what many investors and users claim to be the main reason for all the positive attention it’s getting, is the fact that people are starting to realize the potential the platform has for vast areas of business and government.
Blockchain: The Bitcoin Platform
To understand what bitcoin is, you must first understand the platform it runs off. Blockchain is the platform that makes bitcoin possible, and it is with this programming that you can begin to understand the wonders of this technology.
The digital information, (or blocks) are built of three parts.
- Storage: Storing info about transactions. Information that is stored are the date, time and dollar amount of the most recent purchase.
- Signature: Who is participating in transactions. Your “digital signature,” much like a username, along with the digital signature of the other party. (Digital signatures can be a bit complex, so it’s best to think of them as a username.)
- Hash: Distinguishing them from other blocks. Utilizing “hash,” which is a unique code that allows the program to tell it apart from every other block. “Hashes” are cryptographic codes (synonymous with encryption, is a practice that secures conversations from third parties) created by special algorithms (algorithms are a process or set of rules to be followed in calculations or other problem-solving operations) that tell the system where something is and what value it has. These can be used to verify information that has not been changed being that they have characteristics from the previous hash.
The second syllable in “block-chain,” is how it continues its public function. Once the third action of “hashing” takes place, the block is ready to become part of the whole blockchain and is ready for public availability.
Is it Secure?
Each user on the blockchain network has their own copy of the blockchain (ledger), that is identical to all others. Spreading the information across each user creates a decentralized and public function that is secure. Its security, in part, lies in the fact that if any information were to be manipulated in any of the blocks, every other block would become defective. The hacker would need to manipulate every copy of the blockchain in order to be effective and successful.
This is a general overview of what and how blockchain works. With this description can you imagine what else the technology can be used for?
Companies are looking into using blockchain to sign leases, or titles of cars, among other things. The best thing about it, in my opinion, is that it is only in its infancy. I think we’re going to see its uses become more common in the coming years.
Related Library Materials
If you're looking for more information about bitcoin and blockchain, Arapahoe Libraries has a host of information in their business databases where you can research further.
Below is a list of materials to help you learn more about bitcoin and blockchain.