Blockchain Basics. What you should know before entering this industry
People used to talk about blockchain technology as something that had great potential. However, that conversation has now changed. Blockchain is no longer an industry with great potential, but the reality for all forward-thinking individuals in the world.
Lots of people, companies, and governments are using blockchain technology and their number is constantly increasing. They have seen the benefits of turning to blockchain and prefer using the system over the outdated platforms they used before.
Following the right people
If multi-national corporations and world superpowers such as China, Russia, and the USA are investing heavily in blockchain, then you should start keeping tabs on the industry too.
However, keeping track of all the latest blockchain developments in the industry is difficult. There are so many things happening all the time, that it’s impossible to stay on top of all the information that comes your way.
That’s why you should look to the blockchain professionals for help. If you want to get the latest blockchain developments and news, you should start following the top Blockchain experts in the industry.
People such as Vitalik Buterin and Charlie Lee have been personally involved in creating and developing blockchain technology. This means that they can tell you all you need to know about how secure, useful, and practical the system is, as well as keep you up to date with all the latest developments.
However, before you start rubbing shoulders with the experts, it might be better to learn a thing or two about the blockchain basics first.
What’s a blockchain?
In the simplest of terms, a blockchain is a network of computers where information is stored. Various types of data can be stored in a block. A block can store voting records, medical records, smart contracts, financial transactions, personal data, land records, etc.
Now here comes the interesting part. The blockchain data is not stored on one computer or in one place. It is stored across an entire blockchain network. This is what makes the blockchain decentralized.
Each computer in the network has an identical copy of the data in the blockchain. This means that the blockchain is not only decentralized but is also distributed. That’s why you sometimes hear people say that the blockchain is a distributed ledger.
And when something is decentralized and distributed, there is no central company, bank, or person that owns the system. Everyone uses, and more importantly, helps run the system.
How does it work?
If you want to understand blockchain completely, you first have to know what a block is. In a nutshell, a block is a piece of information that is made up of data and is later stored in the network.
Each block contains a timestamp which is used to create a hash of the block. The block has its own hash, but also the hash of the previous block. The hash is the unique identity of each block.
So how does it work? Well, when a block stores new data, let’s say a financial transaction has been made, the block has to be added to the blockchain. First, the transaction you made is included in a block with lots of other transactions and pieces of data. Then the data is verified. This is done by the network of computers we talked about above.
As soon as this is completed, each block gets its own hash and the hash of the preceding block. When this is done, the block is added to the blockchain.
Blockchain solves ‘unsolvable’ problems – The Byzantine generals’ problem
To make the blockchain work, experts had to find a solution to a challenging conundrum – the Byzantine Generals’ Problem. All systems that require full consensus, face the same problem the Byzantine generals had.
We will explain the story of the generals so that you can get the idea of the consensus problem. Let’s imagine a group of generals. They are trying to conquer a city, and they have to attack together to succeed in their conquest. However, the generals are dispersed around the city and cannot communicate with each other as they are too far away.
The only way the generals can coordinate themselves is via messengers. But this causes a series of problems:
- The messengers may fail to deliver the information;
- They might deliver the wrong information;
- One of the generals may intentionally try to sabotage the others with the wrong info;
This problem remained unsolvable for a very long time. That is until blockchain came into existence. The people who invented the blockchain faced the same reliability problem the Byzantine Generals had.
They didn’t know which individuals in the network could be trusted, and which were deceitful. So they tried to find a solution. And they did.
The key to their solution was that all of the ledgers the computers (generals) get are the same for everyone. When one ledger changes, all other ledgers change too. And each change must be proven to be true by the blockchain. This means that the blockchain is always in consensus.
If you want to understand how a blockchain network works in detail, 3Blue1Brown’s video on how Bitcoin actually works is the perfect first step in to understanding how these things work under the hood.
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The blockchain is the first distributed ledger in the history of mankind that is in full consensus all the time. Quite remarkable, right?