Blockchain is Bitcoin’s decentralized ledger which keeps track of each customer transaction and is visible to anyone who downloads the software. On October 31st 2008, Satoshi Nakamoto sent an email to an obscure cryptography mailing list stating “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”
Blockchain technology is the basis for bypassing the middleman using computers, algorithms, hashes and cryptography with community members verifying the transactions. The blockchain was the missing link to decentralized digital currency.
For hundreds of years banks have kept a secret ledger of
accounts of individuals private information and transactions. The blockchain gives anyone with a computer
access to the ledger. 2009 was the first
time a person could send a transaction anywhere in the world without going
through a central institution. All the
information of the transaction, personal information, underlying data are all
encrypted and placed in blocks in 10-minute intervals.
Each transaction creates its own hash encryption which is 64 characters as shown here for an example. These transactions are then sequentially linked to each other, and then miners scramble to find the winning block hash decided by Bitcoin’s core algorithm.
miners to find this block hash are awarded a certain amount of Bitcoin. Almost as a side effect of trying to find the
block hash miners verify the transaction in pursuit of the block and the
Bitcoin. The community then verifies the
legitimacy of the block in the blockchain.
A consensus on the block is very important as this can deter bogus
transactions or double spends of Bitcoin.
The 51% attack is if a group of miners controlled more than 50% of the hash-rate and were granted at least every other new block. A new blockchain could theoretically end up forming instead of the legitimate transactions. One deterrent is that a block producer will not get paid until 99 more blocks have been formed.
Secondly it would cause Bitcoin to lose value
which would not be profitable. But still
a nefarious country who wants to see Bitcoin taken down could hypothetically do
so through this sort of attack on the blockchain. Even with this attack, there
are checkpoints that are hardcoded into the software that will not allow
someone to change past transactions.
Blockchain is 10 years old and still in its infancy, it will have plenty of growing pains going forward but the technology itself is sound. Technology is creating greater efficiency which takes much less power than when Bitcoin began.
Other technologies using blockchain have different hash algorithms which are increasing speed of transactions. For those who wish to invest in crypto you are an early adopter of the technology and the growth curve is all still in the future.
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