Last week we provided beginners with an introduction to the concept of smart contracts and looked at further applications like self-paying loans and mortgages. This will be a brief post explaining ‘what is blockchain technology’ for beginners to the cryptosphere. We will also discuss the importance of the nodes and miners that support the blockchain.
A blockchain is a massive index of information. which is then stored in blocks and linked together in chronological order. Data on the blockchain becomes permanent. The features of this technology include reducing the chance of fraud, increasing transparency, and allowing for scalability as you can always add blocks to the chain.
What is Blockchain Technology
Any chain starts with the genesis block, the first block of any respective cryptocurrency.
From the genesis block, subsequent blocks are attached in sequential order,. As each block is completed, or filled with data, it is connected one to the next one, forming a chain. Each clock is linked to the previous block as the hash of the prior block is added on to the next one. This makes alteration of a hashed block extremely difficult.
Each block has certain characteristics, including the data, the nonce and the hash. The data is the information that is stored on the block,. A nonce is a “number only used once” that is added to a hashed (encrypted) block and there is no possibility for duplicating this number on another block. The hash converts the amount of information in the block into an encrypted output of a fixed length (the length of the hash is a 256-bit number).
The Importance of Nodes
Anyone asking ‘what is blockchain technology’ must consider that there are also entities that support the blockchain. Nodes are devices that maintain copies of the blockchain and help keep the network running. These nodes provide a system of verification for information on the blockchain as well as maintaining the integrity of the blockchain, making it more trustworthy. Indeed, blockchain technology and its means to verify information on the chain will allow for a more trusting set of transactions.
Nodes are also critical because information from the blockchain is not stored in any one centralized location. If a hurricane took out networks on the east coast of the U.S. for an extended amount of time, the network (let’s say Bitcoin) would still run. This is because, even with millions of computers offline, around the world, there are computers which hold the network’s information.
Nodes also keep the information “decentralized” which is massive. Look at banks like Wells Fargo, which have shut down customers accounts due to their political beliefs. A move like that is impossible with a network like the Bitcoin blockchain, because, no central party controls the network! And the reason why no central authority can is because of the nodes that support the cause.
Miners generate new blocks on the chain through the “mining” process. Miners use advanced software to solve ridiculously intricate math problem of finding a nonce that creates the correct hash. With the nonce being 32-bits and the hash 256-bits, that leaves, well… ***throws calculator*** a metric shit-ton of possibilities that must be mined before the right combination is found. The miner who finds the combination gets their respective block added to the chain.
It’s late and I’ve got a meeting tomorrow bright and early. Here are a couple of poignant quotes about the importance of blockchain technology and why we truly need it in our world.
“We have elected to put our money and faith in a mathematical framework that is free of politics and human error.” T. Winkelvoss
“Bitcoin, and the ideas behind it, will be a disrupter to the traditional notions of currency. In the end, currency will be better for it.”—Edmund Moy, 38th Director of the United States Mint
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Further Reading:
Smart Contract Definition For Beginners