Blockchain: A solution-based technology
Every technology came as a revolution to the existing way of doing things. During the barter system, for instance, the means of solving personal needs are limited to the exchange of goods and services by the barter. The system doesn’t satisfy the primary, secondary, and continent functions of money, howsoever, that brought the need for money and the current financial system monetary policy. Nevertheless, the invention of Blockchain is as a result of the limitations in the traditional system of doing things.
Peer to peer transactions motivated the first pronounced implementation of Blockchain. It was as a result of bringing a solution to the Byzantine Generals Problem (BGP) that Satoshi, a pseudo anonymous entity first conceived launching Bitcoin. Bitcoin is the first application of Blockchain. Nonetheless, there exist many applications of Blockchain today beyond Bitcoin and other Cryptocurrencies.
This article is discussing Blockchain and how it is used in Cryptocurrency. Consequently, it will not be much interested in other applications of Blockchain. Notwithstanding, it is necessary to state that Blockchain cannot do everything, but you can leverage it in certain use cases.
What is Blockchain?
Although Blockchain, like every other ingenious invention, has different definitions according to perspectives, a more simplified explanation of Blockchain is a “chain of Block” whose aim is to democratize, decentralize transactions in a yet transparent and secured manner. It is an ingenious technology which enables a trustless, transparent, anonymous, and secured transaction in a distributed system.
In Blockchain, you have interconnected nodes across the globe that enables a peer to peer transaction among each other. Hence, any use case like supply chain, logistics, identity, finance, etcetera, that needed automated transaction, Distributed ledger technology, and consensus-based governance should think of using Blockchain.
Types of Blockchain
There are two types of Blockchains: Public and private Blockchain. A public Blockchain is called permissionless Blockchain, while the private Blockchain is permissible. Examples of public Blockchains are Bitcoin, Ethereum, EOS, and etcetera, while private Blockchain includes Hyperledger, Ripple, among others. In any case, the two types of Blockchain have almost the same functionalities but differ in architecture, application, privacy, and access management.
Blockchain has the following technologies, among others:
Smart contract: in traditional institutions, you must need a third party to verify your transaction. However, the application of Blockchain enables you to abide only by the terms of the smart contract. Once the terms of a smart contract are reached, then your transactions and deals do not need a central authority or a third party.
Ethereum was the first Blockchain to use Smart contracts for the transaction and predefined deals. However, various Blockchains are now using Smart contracts, including EOS, TRON, NEO, etceteras.
Distributed ledger technology: Imagine a peer to peer system where your transaction is secured, private and you can verify transactions? In such a distributed system, you only need to verify as the system allows immutability of your transaction; accordingly, it offers you a trustless process. According to Wikipedia, A distributed ledger (also called a shared ledger or distributed ledger technology or DLT) is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions. Therefore, there is no central administrator or centralized data storage. In Cryptocurrency transactions, the Distributed Ledger integrated into the digital wallets enables users to verify and transact with each other across the nodes.
Consensus mechanisms: Blockchain offers a governance model called consensus mechanism. Instead of waiting for a central authority to make decisions, the community can vote, stake, and democratically choose to make decisions.
Blockchain and Cryptocurrency
The first Cryptocurrency is Bitcoin, and it was invented in 2008 by Satoshi, a pseudo-anonymous entity, for peer to peer transactions in a distributed system. Since then, there are thousands of Cryptocurrencies, including Ethereum, EOS, Dash, Litecoin, Electronium, Qubitical, and etcetera.
Blockchain pioneered the invention of Cryptocurrency because it offered the functionalities that will permit peer to peer, secure, anonymous, and democratic transactions.
Cryptocurrency can be decentralized and centralized. It is an example of a digital currency used as a medium of exchange and uses encryption techniques to regulate and verify the transfer of units of transaction. With Blockchain’s Distributed ledger technology and consensus, the encrypted transfer of units is seamless, secure, and faster without the need of an administrator.
Okereke has a passion for researching blockchain and cryptocurrency. He enjoys creating long form educational content to inform others on the opportunities in this space.