What is Blockchain and Bitcoin?
Before we go on to understand what is Blockchain, it important that you understand what is Bitcoin:
Bitcoins are a crypto-currency and digital payment system invented by an unknown programmer, or a group of programmers, under the name Satoshi Nakamoto. That means they can be used like a usual currency, but don’t physically exist like dollar bills. They are an online currency which can be used to buy things. These are similar to “digital cash” that exist as bits on people’s computers. Bitcoins exist only in the cloud, like Paypal, Citrus or Paytm. Even though they are virtual, rather than physical, they are used like cash when transferred between people through the web.
The Bitcoin system is peer-to-peer network based and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes and recorded in a public distributed ledger called a Blockchain. Since the system works without a central repository or single administrator, Bitcoin is called the first decentralized digital currency.
Bitcoin production makes them a unique currency. Unlike normal currencies, Bitcoins cannot be created as needed. Only 21 Million Bitcoins can be created, of with 17 million have already been created. Bitcoin get created whenever a block containing valid transactions is added to the Blockchain. This is the only means for creating Bitcoins and through various mathematical and encryption algorithms we ensure no fake Bitcoins are created or circulated. Let us now understand more Blockchain.
What is Blockchain?
Blockchain can be called the spine of the entire crypto-currency system. Blockchain technology not only helps with the users perform transactions using crypto-currencies but also ensures the security and anonymity of the users involved. It is a continuously growing list of records called blocks, which are linked and secured using cryptographic techniques. A Blockchain can serve as “an open and distributed ledger, that can record transactions between two parties in a verifiable and permanent way.” This ledger that is shared among everyone in the network is public for all to view.This brings in transparency and trust into the system.
A block is the ‘current’ part of a Blockchain which records some or all of the recent transactions, and once completed goes into the Blockchain as permanent database. Each time a block gets completed, a new block is generated.
The Blockchain is typically managed by a peer-to-peer network, collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks and a collusion of the network majority. Transactions once stored in the Blockchain are permanent. They cannot be hacked or manipulated. We will learn more about this once we get into the concepts of Blockchain.