Bitcoin and Blockchain; Understanding the Basics

Bitcoin and Blockchain; Understanding the Basics

Nowadays, we hear words we were totally unaware of 10 years ago. Cryptocurrency and blockchain are among those new words. Most individuals use these words without even knowing their meaning, phenomena, or the interests behind them. 

Cryptocurrency – Bitcoin

Cryptocurrency is a digital currency based on cryptographic sciences and computing. Bitcoin is one of the fundamental cryptocurrencies that stands on the pillars of the Blockchain mechanism. And blockchain is the underlying technology of Bitcoin depending on cryptology and peer-to-peer network. You can also trade in bitcoin using Bitcoin Trading Software. Before you start with cryptocurrency trading, you have to make sure the platforms are safe, trusted and easy to use.

Bitcoin

Bitcoin is a virtual currency as individuals compare it with gold as it’s a safe asylum. Bitcoin symbolizes by the trigger: BTC

Bitcoin published its source on Github which means anyone can access the code, alter and rectify the errors and establish a different coin based on Bitcoin. Bitcoins are kept in virtual wallets. Just like the physical wallet, we can send and receive money (coins) to and from other wallets. The value of Bitcoin has become the multiple of more than twenty million, since its creation. Its value in the market is described by the supply and demand. The share of Bitcoin capitalization is more than 50% of the total equity capital of cryptocurrencies. 

Strengths of Bitcoin

  • Bitcoin is easily divisible.
  • It is secure and not possible to counterfeit.
  • It is easy to transmit worldwide.
  • There is no need to reserve it in boxes for security purposes.
  • The transfer of bitcoins does not require permission from any central organization.
  • It is very user-friendly.

Weaknesses of Bitcoin

  • There are chances of high transaction fees.
  • The number of transactions is directly proportional to time.
  • Bitcoin is not scalable.

Blockchain

Blockchain technology ensures transaction management with trustworthiness, substantiation, timestamping, safety, detectability, and veracity. It depends on the following three principles;

  1. Peer-to-peer network
  2. Organizing chain of blocks by digital ledger and cryptographic functions
  3. Consensus, allows the transaction to be verified.

Blockchain is a technology designed to enable information storage and transaction management in the distributed network (peer-to-peer) of computers. Blockchain is the other side of the centralized coin which is the opposite. In a central network system, there is a server or hub to control and manage the transactions. 

In a distributed architecture, there is no need for a third party. Two members can easily make transactions directly until and unless any blockchain software is involved to validate these transactions. 

A ledger, built with blocks

Blockchain technology is standing on a digital ledger that acts as a database to keep the record of all the transactions in the respective network. The only thing that distinguishes the database from the ledger is that in the database you can make amendments while in the ledger there is no chance to change anything at all. Blocks of transactions are kept in the ledger. After creation, the block cannot be modified and a new block is merged with the old blocks created.

All the blocks of the ledger are interlinked via a digital signature that is also known as the hash of the block. These blocks are connected and linked to the cryptographic software that sets up the blockchain itself. A blockchain also maintains accounts and their balances. Before the occurrence of the transaction and its validation, accounts are surveyed. When the transaction is confirmed, the amount of the accounts rises and falls, respectively.

Consensus

When a block is established, all the network nodes validate it. The nodes of the network inspect three things;

  1. Whether the transactions are regular or not
  2. Whether the accounts have that much amount
  3. And whether the transaction amount and the account balance are aligned

Besides validating the block, the nodes also establish a digital signature using a cryptographic function. Every block has the digital signature of the preceding block, which automatically interlinks all these blocks in the blockchain. A hash function converts a fiber of characters of any size to establish the same but with fixed sizes. 

This signature cannot be used to locate the initial thread that has been signed. Changing a single character in the block changes the signature to a whole new level. This string is called the nonce. 

On finding the right nonce for a new block, the node sends it to other nodes to check its operations and validity. This mechanism is known as Consensus.

 


Support us by following us on Google News to ensure you don’t miss out on any future updates. 

Send comments, press releases, tips, and guest posts to info@afritechmedia.com.


Leave A Reply