Sunday, 19 March 2017

Blockchain (Part 1)

Blockchain. Bitcoin. Distributed Ledger. Are you also one of those who are intrigued by these new terms that are making rounds world over? If yes, don't worry you are not alone and part of approx. 99% of world community who is yet to understand what exactly it means. Even the 1% who say they know it probably do not completely understand it.

Let me try to explain. Blockchain is the underlying protocol of Bitcoin. Distributed ledger is an important component of Blockchain. Bitcoin is a currency that no single country owns. What? Yes, Some unknown person/community/organization named Satoshi Nakamoto had come up with ground breaking idea on Bitcoin in 2008 and then it just took off. People interested in Bitcoin idea formed a group and created the Blockchain network for exchange of Bitcoin crypto currency between network members.

The Bitcoin network participants own the currency which is purely in digital form that has few unique characteristics. Network has capacity to generate new currency to participants based on their contribution to the network activity called as mining. Once it is generated, it becomes part of owner's Bitcoin wallet. The owner can then transfer it to other participants as per his or her wish. It is analogous to the way we have our physical wallet with govt. issued currency in it but, different than online bank account. The participants don't know each other since all have hexa numerical identity on the network.

Blockchain is more generic and broader concept. Bitcoin is one use case of Blockchain. Other features of Blockchain are - pki cryptography and hashing. PKI cryptography makes sure that only authentic owner of Bitcoin (or any other digital asset that is getting exchanged over network) will be able to spend them. Hashing makes sure transactions are connected to each other and are tamper proof. Some transactions are grouped together to form a block and these blocks are connected to each other. Connection of Blocks gives it the name Blockchain.

Distributed ledger helps remove intermediaries. All participants have copy of all transactions happening over network in chronological order. That is why we say nobody owns Bitcoin and all are equal.

Blockchain is democratizing the way people interact and transact with each other rather than any single company providing the platform and earning huge profits out of it. It is going to be threat for many successful businesses such as google, facebook, uber, amazon etc.

Hope you are now better informed on this new emerging concept. We will cover more on it in next part. Keep reading!

Thank you,
MintStat Team