Grappling with blockchain basics? Struggling to sort your digital assets from your distributed ledgers? We’ve got you covered, with this Blockchain 101.
The world of digital currency and blockchain technology can at first seem a confusing place to be, particularly for those approaching from a commercial rather than technical perspective. With the right terminology at your disposal, it becomes a whole lot easier to understand how this revolutionary technology works, and how you can use it to your advantage.
What is blockchain?
Blockchain is the core technology that underpins cryptocurrencies like Bitcoin. But don’t be fooled—it’s way more powerful than simply overhauling payments and transactions. In essence, blockchain is a distributed ledger of transaction data blocks, each linked to the other in sequence order. Each of these transaction data blocks is recorded on a network of individual servers, or nodes, located around the world, with no one central server – it is this feature that makes the technology so powerful.
Unlike a central database, which can be distorted, changed, or otherwise modified centrally, the distributed network of nodes supporting blockchain means there is no scope for interference. Data written to the blockchain is recorded permanently and stored across this distributed network, providing a single source of truth. This has a myriad of real-world applications as a technology, and is in large part responsible for blockchain’s world-defining potential.
Bitcoin is born
The Bitcoin whitepaper was published in 2008—a defining document that eventually gave rise to Bitcoin as a digital currency, and as a protocol for developing a new generation of smart apps. Satoshi Nakamoto put in place the framework from which the sector as we know it today has grown and flourished.
Established as a peer-to-peer cashless payments system, Bitcoin has already taken the world by storm. As it embarks on its next decade, Bitcoin—now reborn as Bitcoin SV (BSV)—is set to become even more widely used for payments worldwide.
But arguably it’s the technology behind Bitcoin and the possibilities it presents that are most exciting.
How the Blockchain works
Blockchain users broadcast transactions, which are written to the blockchain and stamped by cryptographic keys. This creates the immutable record from which a world of apps can derive the data they need to perform specific functions, often automatically. The data written to the blockchain is secured by miners running nodes, which they do in exchange for mining rewards. This is known as proof-of-work, where miners are rewarded for supporting the distributed ledger system.
Practical use cases
Because there is no central source of authority required, blockchain is the ideal solution for automatically recording data, such as transaction information. Apps built on the Bitcoin blockchain can use this data along with scripts known as smart contracts to execute actions based on the information on the blockchain. In the knowledge this information is accurate and verified, the technology allows for greater automation and interoperability of other technologies, which is already ushering in a new era of a technologically smarter world.
While there’s scope to go a lot more in-depth into the workings of blockchain and Bitcoin, that should give you some idea of the fundamentals behind this technology. In just over a decade since the Bitcoin whitepaper explained the concept for the first time, blockchain has already risen to mainstream prominence.
With the usage of and development activity on BSV at an all-time high, we can’t wait to see what the next decade has in store.