Introduction

If you are a beginner that is just starting out in the digital space, then understanding Blockchain technology is the starting point for you to getting started in the whole world of web3 and crypto currency. This article is beginner friendly because it simplifies the concept of Blockchain and cryptocurrency.

What is Blockchain

Blockchain is a database that stores a record of every transaction that has ever been carried out. It is called Blockchain because every transaction is collected into blocks.

What is Blockchain technology

It is a technology that creates a working relationship between humans and machines in an automated economy system using cryptocurrencies. It is otherwise described as a public distributed ledger technology because records of transactions are distributed across a ledger system called blocks.

A block is a record book that consists of details or records of transactions carried out.

Its database stores data or records of transactions in blocks that are linked together in a chain hence the name Blockchain.

How Blockchain works

The transaction between the parties involved is distributed across the entire network meaning that data/record of the transaction is replicated and stored on each node across the entire Blockchain network. Blockchain makes transactions easier without having to deal with issues of online bank wallet, third party application etc.

Practical example

Three (3) friends named Berry, Swizzy and Baelyn wanted to send Bitcoin to each other. Initially, Berry had 7BTC, Swizzy 2BTC and Baelyn 3BTC. When Berry and Swizzy send 5 BTC and 1 BTC to Baelyn, a record of transaction is created in the form of a block and their transaction details are permanently inscribed in those blocks and the record holds the total number of Bitcoin remaining in the original wallet of each individual. The blocks are linked to each other to take records of previous transactions.

The chain of records or blocks is called ledger and the ledger is shared among the 3 friends so that everyone can have a copy of the ledger. So, Blockchain is described as a collection of records, linked together in chains and strongly resistant to alteration and protected using cryptography.

Features of Blockchain

1. Encryption

2. Proof of work: It's a process of solving complex mathematical puzzles to verify the accuracy of new transactions about to be added to a block before it is distributed across chains. The incoming blocks are validated before it is added to the distributed ledger. This way, it is impossible to spend the same amount of this digital money in different places before the system can record the transaction.

Example: If you write a cheque to a bank to pay a stated amount of money to a named person, every party involved in the transaction is relying and trusting the bank to cash the money. With cryptocurrency, there's no bank, rather there's proof of work and miners that facilitate and verify the transaction.

1. Public and private key

2. Mining: it's a process where miners generate new crypto coins and verify new transactions by solving complex mathematical puzzles using advanced computers.

How mining work

Mining a cryptocurrency is carried out with specialized machines or computers that can carry 100gb at a processing speed of 4 billion guess power/sec. We have about 7000 nodes globally distributed. When transactions are submitted, it is collected into blocks and every 10 minutes, the software issues a random number called NONCE. Every participating miner competes to solve the puzzle(blocks) and the first miner that solves it at the allocated time, is able to confirm the transaction and rewarded with a specified amount of BTC. Once the transaction is confirmed, the other nodes are notified, which is why it's almost impossible to alter a transaction record.

Verification process in Blockchain

The blocks contain a digital signature, public and private keys and other relevant information. The public keys serve as an access token and unique identity to the user.

Once a transaction is initiated, the sender's message is passed through a hashing function to produce an output that is then passed through a signature algorithm using the user's private key to produce a digitally signed document of the transaction flowing across all nodes on the network and the individuals public key is used by the miners to verify transaction. Miners include the transaction to the blocks and when the right individual matches the blocks,the transaction gets completed successfully.

What is cryptocurrency

As physical money is to bank wallet so is cryptocurrencies to Blockchain. Cryptocurrencies are non-physical money or are digital currency that doesn't require a bank to perform transactions. It was created to perform transactions in a decentralized system, making it a self-dependent currency that doesn't require a central authority to approve transactions. Every transaction carried out is uploaded on a Blockchain. The first cryptocurrency was Bitcoin (BTC) and it was created by Satoshi Nakamoto who's real identity is unknown.

Example of digital currencies

Conclusion

The whole concept of Blockchain and cryptocurrency is still in its infant stage. Read more, join communities that share valuable insight on the ever-changing opportunities that exist through the transformative power of Blockchain technology and cryptocurrencies.

Definition of terms

Nodes: it's like a giant spreadsheet or central computer with one unified ledger on the internet that records proof of transactions and sends copies to all other nodes around the globe.

Decentralization: means without a central authority. It is a process by which information in a blockchain is not stored in a central location but is distributed across computer networks(nodes) where each block has a copy of the original data making it almost impossible to alter the information.