What is blockchain

In the simplest terms, a blockchain is a type of database – a collection of electronically stored information or data. A blockchain has many unique features that make it different from a traditional database. As the name suggests, a blockchain is a series of data ‘blocks’ that are linked together. This chain of blocks creates a shared digital ledger (collection of data) that records the activity and information within the chain.

Each blockchain ledger is stored globally across thousands of different servers. This means that anyone on the network can see (and verify) everyone else’s entries. This peer-to-peer and distributed ledger technology, as it’s known, means that it’s nearly impossible to falsify or tamper with data within a block.

So blockchain is a public, immutable (permanent and unalterable) ledger that facilitates the process of recording transactions and tracking assets.

What's the big deal about blockchain technology?

There have been numerous attempts in the past to create digital money, but they have all failed.

The overarching issue is one of trust. How can we trust that if someone invents a new currency called the X dollar, they will not give themselves a million X dollars or steal your X dollars?

Bitcoin was created to address this issue by utilising a type of database known as a blockchain. Most normal databases, such as a SQL database, have someone in charge who has the authority to change the entries (e.g. giving themselves a million X dollars). Blockchain is unique in that no one is in charge; it is run by the people who use it.

• A blockchain is a database that stores encrypted blocks of data and then links them together to form a single source of truth for the data.
• Instead of being copied or transferred, digital assets are distributed, resulting in an immutable record of an asset.
• The asset is decentralised, allowing the public full real-time access and transparency.
• A transparent ledger of changes protects the document's integrity, fostering trust in the asset.
• Blockchain's inherent security features and public ledger make it an ideal technology for nearly every industry.

How does the Blockchain work?

Blockchain is made up of three key concepts: blocks, nodes, and miners.

Blocks
Each chain is made up of multiple blocks, each of which has three basic elements:

• The information contained in the block.
• A nonce is a 32-bit whole number. When a block is created, the nonce is generated at random, which results in the generation of a block header hash.
• The hash is a 256-bit number that is linked to the nonce. It must begin with a large number of zeroes (i.e., be extremely small).

A nonce generates the cryptographic hash when the first block of a chain is created. Unless mined, the data in the block is considered signed and forever linked to the nonce and hash.

Miners

Mining is the process by which miners add new blocks to the chain.

Every block in a blockchain has its own unique nonce and hash, but it also refers to the hash of the previous block in the chain, making mining a block difficult, especially on large chains.

Miners use specialised software to solve the incredibly complex math problem of generating an accepted hash. Because the nonce is only 32 bits long and the hash is 256 bits long, there are approximately four billion nonce-hash combinations that must be mined before the correct one is found. When this occurs, miners are said to have discovered the "golden nonce," and their block is added to the chain.

Making a change to any earlier block in the chain necessitates re-mining not only the changed block, but all subsequent blocks as well. This is why manipulating blockchain technology is so difficult. Consider it "safety in math," because finding golden nonces takes an enormous amount of time and computing power.

When a block is successfully mined, the change is accepted by all of the network's nodes, and the miner is financially rewarded.

Nodes

Decentralization is an important concept in blockchain technology. The chain cannot be owned by a single computer or organisation. Instead, it is a distributed ledger through the chain's nodes. Nodes are any electronic devices that keep copies of the blockchain and keep the network running.

Every node has its own copy of the blockchain, and for the chain to be updated, trusted, and verified, the network must algorithmically approve any newly mined block. Because blockchains are transparent, every transaction in the ledger can be easily verified and viewed. Each participant is assigned a unique alphanumeric identification number, which is used to track their transactions.

Combining public information with a system of checks and balances aids the blockchain's integrity and fosters trust among users.

Cryptocurrencies

The most well-known (and perhaps most contentious) application of blockchain is in cryptocurrency. Cryptocurrencies are digital currencies (or tokens) that can be used to purchase goods and services, such as Bitcoin, Ethereum, or Litecoin. Crypto, like a digital version of cash, may be used to purchase everything from your lunch to your next home. Unlike cash, cryptocurrency employs blockchain to serve as both a public ledger and an upgraded cryptographic security system, ensuring that online transactions are always recorded and secure.

To date, there are around 6,700 cryptocurrencies throughout the globe, with a total market valuation of nearly $1.6 trillion, with Bitcoin accounting for the vast majority of the value. These tokens have grown in popularity in recent years, with one Bitcoin equalling $60,000. Here are some of the primary reasons why people are suddenly interested in cryptocurrencies:

• Because each cryptocurrency has its own irrefutable traceable number that is tied to one owner, the security of blockchain makes theft much more difficult.
• Crypto eliminates the need for individual currencies and central banks- Using blockchain, crypto may be transmitted to anyone and anywhere in the globe without the need for currency exchange or interference from central banks.
• Cryptocurrencies have the potential to make some individuals wealthy- Speculators have driven up the price of cryptocurrency, particularly Bitcoin, allowing some early adopters to become billionaires. Whether this is genuinely a positive remains to be seen, as some critics say that speculators are not thinking about the long-term benefits of crypto.
• Large organisations are increasingly warming to the idea of a blockchain-based digital currency for payments.

Ethereum

Vitalik Buterin, a Russian-Canadian developer, issued a white paper in late 2013 proposing a platform combining standard blockchain features with one important difference: the execution of computer code. As a result, the Ethereum Project was founded.

The Ethereum blockchain enables developers to design complex programmes that can connect with one another on the network.

Tokens can be created by Ethereum programmers to represent any type of digital asset, track its ownership, and perform its functionality according to a set of programming instructions.

Tokens can be anything from music files to contracts to concert tickets to a patient's medical records. Non-Fungible Tokens (NFTs) have recently become popular. NFTs are one-of-a-kind blockchain-based tokens used to store digital media (like a video, music or art). Each NFT is capable of verifying the validity, history, and sole ownership of a piece of digital media. NFTs have grown in popularity because they enable a new generation of digital producers to buy and sell their works while receiving correct credit and a fair portion of revenues.

New blockchain applications have expanded the technology's ability to permeate other areas such as media, governance, and identity security. Thousands of businesses are currently exploring and producing goods and ecosystems that are totally based on the emerging technology.

Blockchain is upending the present state of innovation by allowing businesses to experiment with ground-breaking technology such as peer-to-peer energy distribution and decentralised forms of news media. The uses for the ledger system, like the definition of blockchain, will only change as technology improves.

Other blockchains like Solana, Cardano, and layer-2 solutions like Polygon, Fantom, SKALE, ImmutableX, are all coming up with new and innovative reasons to pull developers and entice them to develop on these newer chains.

Blockchain offers practically limitless uses in almost every industry. The ledger technology can be used to track financial crime, securely transmit patient medical records amongst healthcare experts, and even track intellectual property in business and music rights for artists. The applications are endless, and this is just the beginning of the web3 world.

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