Blockchain
There has been a rampant rise in usage of the term ‘cryptocurrency. This term is ranking the word charts since it is new and also, it promises some ease when it comes to money. There is a whole generation aka Gen Z who hold the view that it is easier to access your currency and use it without the hassle of actually handling money like the old traditional times. To put it into simpler words, cryptocurrency is intangible, unlike the normal currency. Cryptocurrency is virtual or digital money and the word cryptocurrency is coined by mixing crypto (ref. cryptography) and currency (money).
What followed the rise of cryptocurrency was a variety of coins like bitcoins, litecoins, ethereum, etc. However, when it comes to money, all of us want it to be secure, right? We want to take risks with it but also ensure that we keep our cryptocurrency safe from any unwanted third-party attacks. It was with this concern that the word blockchain also started joining the bandwagon of the trending words.
But if we look at things from a naïve investor’s perspective, it appears like a very strange terminology. So what exactly is a blockchain? A blockchain is a digital record of transactions. This name too comes from combining two words block and chain. Here, individual records are called blocks that are linked together in a single list called a chain. A blockchain is a digital ledger consisting of records/ blocks that record transactions across many computers so that any involved block cannot be modified without the modification of all subsequent blocks.
Let us look at an example to understand this better. Four-five of us are playing a game of cards together and each person keeps a record of the points of each player after each round. In the end, while totalling to see who won the game, one of the players tamper with his own score in order to win but doesn’t succeed since his total doesn’t match with the common total of the rest and hence gets caught while tampering. This is a similar case with blockchain.
If you are looking for a better real-time example, one can look at google docs too. When we create a document and share it with a group of people, the document is distributed instead of copied or transferred. This creates a decentralized distribution chain that gives everyone access to the document at the same time. How it keeps a track of the changes made in real-time and lets everyone access the document at the same time too. All the changes that are made into the document are completely transparent too.
Blockchain comprises of three important concepts: blocks, nodes and miners.
1.Blocks:
Each chain is made up of blocks/records. Each block consists of:
a. The data in the block.
b. A nonce is a randomly created 32-bit number that generates a hash.
c. A hash is a 256-bit number wedded to the nonce.
The data in the block is considered signed and is forever linked with nonce and hash.
2. Miners:
Miners create new blocks on the chain through mining. Miners need to find the exact nonce that generates the correct, acceptable hash. There are roughly four billion nonce-hash combinations that must be mined before the right one is found. The right one is also referred to as the “golden nonce” and upon finding that, the miner’s block is also added to the chain. When a block is successfully mined, the change is accepted by all of the nodes on the network and the miner is rewarded financially.
3. Nodes:
Decentralization is one of the major components of the blockchain. No single entity can own the chain. Nodes are any electronic device that maintains the copy of the blockchain and keeps the network functioning. Every node has its own copy of the chain. The network must approve any newly mined block with the help of some algorithms. Every action in the ledger is viewed and can be checked by all. Each participant is given a unique identifier (alphanumeric key) to view their transactions hassle-free.
These are just some basic terminologies that are related to blockchain and help you to know it better. Thank you for spending out the time to read it.
Until next time, happy learning.
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Vidhi Parikh
I write and talk about almost everything from tech to fiction. It differs from how much interest the topic holds. What do you want to talk about over coffee?
