The Bitcoin Blockchainis the distributed ledger that stores every Bitcoin transactions that have ever transpired in its history. It began with “Bitcoin: A Peer-to-Peer Electronic Cash System” the White Paper written by Satoshi Nakamoto. The code was released as open source in January 2009. The blockchain began shortly afterward when Satoshi Nakamoto “mined” the first Bitcoins. Satoshi Nakamoto disappeared from the public in April 2011.
Blockchain technology will revolutionize business and redefine companies and economies, making it possible for every agreement, every process, every task, and every transaction to have a digital record and signature that could be identified, verified, stored, and public.
“A purely peer-to-peer version of electronic cash that would allow online payment to be sent directly from one party to another without going through a financial institution.” -Satoshi Nakamoto
Public, Permissioned, and Private Blockchains
There are three types of Blockchains:
- Public Blockchain: Bitcoin is the primary example of a Public Blockchain- a large shared network that operates by a common token or coin. They’re open to anyone to join. They contain Open-source code that is maintained by the community.
- Permissioned Blockchain: Ripple is an example of a Permissioned Blockchain- These are also large shared systems that use a common token or coin. The blockchains are usually maintained by a designated group of developers.
- Private blockchains: Private blockchains usually operate on smaller networks and do not use a token or coin. Their association is closely managed. These sorts of blockchains are usually maintained by a team of developers within the organization or company and contain confidential private data.
The blockchain is used to create a permanent, public, transparent ledger system for compiling data, any data stored on the blockchain is considered incorruptible. Blockchain technology offers a cheaper and faster process with its ability to record infomation efficiently and in a verifiable permanent way, making it a superior financial system over traditional banking.
We live in a world where banks and governments control every financial decision made. Banks charge a large fee for each transaction. Blockchains are a cheaper secure alternative to traditional financial systems around the world. Blockchains are a decentralized and transparent way of recording, storing, and transferring information which cannot be altered or deleted. Thus, It does not have any central authority exercising control over it, and it’s a permanent record which anybody can access to verify proof of a transaction.
Using the Hashcash Proof-of-Work(PoW) algorithm blockchain transactions are verified and secured at a lower cost than traditional banking. Bitcoin transactions are recorded by the blockchain miners, and each transaction charges a blockchain fee, also called ‘miners’ fee. The miners’ fees, is charged to the sender when performing a bitcoin transaction, and allows the sender to declare a priority level for the transaction. A lower blockchain fee, results in a lower priority in the Bitcoin network, the blockchain prioritizes transactions to determine what will be recorded in the next block of the blockchain.
A block is recorded once a miner solves the PoW algorithm, then the miner collects the fee as a reward for maintaining the Bitcoin network. If the miner is mining with a pool, then the reward is shared with other miners who contributed to discovering the block. The proportion of distribution in a pool is determined by the rules of the pool or “node” server.
Blockchain solved the “double spending” problem we have with the current financial systems. Each block is securely hashed-meaning the private data it contains is rendered into a cryptographic hash key. Every transaction creates multiple hash outputs, which are assigned as a Transaction Identifier (TXID).
As every miner has a real-time copy of the blockchain at all times, transactions are compared against the latest version before being validated, any changes made to the blockchain must be accepted by many randomly selected miners, then these changes must be recorded for the entire network to update their local copy as well.
Miners also use the blockchain to verify that a sender has enough bitcoin to cover the transaction, transactions can be automatically tracked in a verifiable way because of the security of a decentralized consensus blockchain. Hacking the blockchain is considered impossible and impractical. Every record on the Blockchain is public and can be viewed on your internet browser via a “Blockchain Explorer”. So, anyone can view any transaction, but due to the private nature of Bitcoin, no one has the ability to determine the identity of account holders.
The blockchain is expected to be fast enough to power the Internet of things(IoT) and is going head-on with the major financial institutions of the banking world. Blockchains are currently being developed by banks, industries, and governments worldwide. Future blockchain developments will change the way we do almost everything, making the world a more efficient, safe, and secure place for everyone.
The Blockchain, It’s the most ground-breaking modern development in technology since the internet and it has a promising future. It’s the force that keeps Bitcoins in motion as it enables transfer of Bitcoins and records all transactions, and is transforming the very basic pillars of global trading.
Blockchain offers a better method for businesses to process digital transactions more effectively. Some well-known applications of blockchain technology include payment systems and digital currency, facilitating crowd sales, or implementing prediction markets and generic governance tools.
Blockchains are being used to develop information systems for medical records, which increase hospitals and medical facilities ability to communicate, exchange data, and use the information that has been exchanged.
The sharing economy and IoT are also set to benefit from blockchains because they involve many collaborating peers. New developments are available for the insurance industry such as peer-to-peer insurance, parametric insurance, and microinsurance by utilizing the blockchain.
Voting systems using blockchain technologies will improve the democracy, transparency, and participation in both business and government.
- Democracy Earth and Follow My Vote are two startups aiming to improve the democratic process by forming blockchain-based online voting applications. Blockchain technology can be used ensure a fair and democratic voting process by using it for identity verification, voter registration, and automatic vote counting to ensure that only valid votes are counted and no votes are modified or excluded.
By creating an immutable record of ownership, the blockchain could eliminate any dispute of asset, property, and land rights.
- Biquity is a block team secured platform for real estate record-keeping which help with tracking and verifying deeds, ensuring the accuracy of documents during property transfers.
- Bitnation became the first decentralized borderless “voluntary nation” by establishing a jurisdiction of contracts and rules, based on Ethereum.
Blockchain technology can offer a new way for countries to settle and track land and borders disputes.
- Factom is an American startup company working on a blockchain-based land registry to help clean up the Property Institute in Honduras.
- Likewise, blockchains are being considered by countries such as Sweden, India, U.S, Moscow, and the Republic of Georgia to settle both domestic and international land disputes.
Blockchain-based smart contracts are contracts that can be partially or fully executed or enforced without human interaction. Smart contracts have the potential to reduce systemic risk and financial fraud.
- Ethereum is a blockchain-based computing platform with a unique scripting language that enables the processing of smart-contracts.
- Smart contracts are being developed for publishing texts and identifying the origin of digital art. Steemit is using the blockchain as a blogging/social networking website and a cryptocurrency.
- Digital assets can be secured like how Cryptokitties uses the blockchain for users to claim ownership of digital game assets. Another industry benefiting from blockchain technology is the music industry, every time a DJ mix is played, the smart contracts attached to the DJ mix pays the artists almost instantly.