Everyone has heard of Bitcoin, but few understand the technological marvel that underpins it. Blockchain is perhaps the most exciting technology of the 21st century, and it’s only just getting started. It’s the latest digital revolution, and almost every industry is going to be transformed by it. Those that take the time to understand what makes blockchains tick will have an advantage in the years ahead.
Most cryptocurrencies you’ve heard of, from BTC to TRX, run on blockchain. Here’s a brief guide on the technology of the BTC blockchain. Where it came from, what it does in simple words, and the ways in which it will be used in the future.
BTC Blockchain — Pioneer in the Industry
The first blockchain in existence was the Bitcoin blockchain in 2008. It was invented by an anonymous figure called Satoshi Nakamoto, who launched the project with a small group of visionaries. It was originally invented as a peer-to-peer electronic cash system.
Since then, the true power of the technology has been revealed. Now, blockchain is being used to revolutionize many industries, including healthcare, finance, and gaming. There are also thousands of cryptocurrencies available to trade: an LTC to BTC exchange is now easier than ever.
What Is Blockchain in Simple Words?
Blockchain is all about making data public and verifiable. Let’s take a payment network as an example. A traditional payment network will have customers that can transact with each other. Each time a customer makes a transaction, the company will update an internal ledger of the funds of each account. This ledger is non-transparent, so each person using it has to trust the company.
Blockchain works completely differently by having a public ledger. Transactions are grouped into “blocks” and added to the public ledger one after another. They are linked together by cryptography, so it’s impossible to hack a blockchain and create false transactions. This means that transactions are public, can be reviewed by anyone, and can’t be changed in retrospect. So, they are “immutable.”
The cryptographic algorithms that link the public blocks together are run by “miners.” These are special users that secure the network by providing computing power. In some networks, users engage in staking (holding crypto coins) instead of mining to secure the network.
Transaction Stages on a Blockchain
These are the main steps conducted in each blockchain transaction.
- Creation: A user on the network creates a transaction request.
- Transfer: The request is transferred to a nearby mining node, where it is verified and validated.
- Confirmation: The transaction is included in the next block and broadcast to the network where it is confirmed by other nodes.
- Completion: A new block is added to the existing blockchain with the transaction in it.
Is Bitcoin Blockchain a Viable Concept?
The immutability and decentralization of the Bitcoin blockchain paint a pretty attractive picture. However, the concept has both benefits and drawbacks. Let’s take a closer look.
BTC Blockchain Pros
The main advantages of blockchain over traditional database information systems are:
- Data protection: Data stored on a blockchain is protected from all kinds of malicious tampering. Any changes can be easily spotted by anyone on the network.
- Transparency: Everything that happens on a blockchain network is visible for the entire network to see. Corruption and collusion are effectively impossible.
- Decentralization: There is no central point of control in a blockchain network. They are much more protected against being taken down or censored.
BTC Blockchain Cons
The core disadvantages of the BTC blockchain are:
- Scalability: When many users are trying to create transactions on a blockchain network, it can slow it down significantly.
- Irreversibility: This is an advantage of the BTC coin, but it can also be a problem in some scenarios. Transactions cannot be undone, even if there was a mistake. This can lead to lost funds.
- Energy consumption: The BTC network uses a significant amount of electricity to operate — more than the total of some countries, such as Austria.
Overall, the bitcoin blockchain is one of the most revolutionary inventions to date. It’s leading to the digitization of all financial instruments and an increase in efficiency in numerous industries. Understanding the basics of what’s behind this great technology will be essential going forward.