So now that we know what Ethereum is, it’s time to look at the technology that powers it: blockchain. You’ve no doubt heard of it. It’s the fundamental technology that cryptocurrencies are built on.
There are a lot of misconceptions about what exactly the blockchain is. Today we’re going to examine the very foundation of crytpo and some of its uses.
The blockchain concept was first envisaged very early in the computer age in 1982 by David Chaum in his dissertation: Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups. Blockchain became more advanced in 1991 and 1992, which paved the way for features still used today.
As you may know, it was not popularized until Satoshi Nakamoto suggested its use in the creation of a decentralized currency in 2008. The idea led to the foundation of the first well-known and the biggest blockchain, Bitcoin, and since then, it has found applications in different industries.
The Basic Principle
At its most basic, the blockchain is a distributed database. It helps to facilitate storage of information digitally between the nodes on a network. Because it is trasparency, every participant in the network can verify the legitimacy of each entry in the database. This makes a blockchain database very secure without a centralized validator.
The critical difference between a blockchain and other databases is how to store data. Traditionally a database will structure its data via tables. However, a blockchain structures its data in blocks.
Block Mining and Cryptographic Function
A block is essentially just a collection of data. Its size is determined by specific parameters specified by the blockchain network. Once a certain time limit is reached, ten minutes in the case of Bitcoin, the block is considered completed and is “mined.”
Once the block is mined, it is closely linked via cryptographic functions to the previous block. This process continues every time a new block is minted, forming a chain known as, you guessed it, a blockchain.
The cryptographic functions ensure that no block will link to any block except the one directly preceding it; thus ensuring no break in the chain. This creates an irreversible timeline of data.
Once a block is completed, it is added to the chain with a timestamp, and every node in the network then stores the new blockchain. This means that no nefarious agent can manipulate it to their advantage.
Every node on the network holds a full identical copy of the ledger that contains every transaction and the balance in every wallet.
This is very taxing and requires a huge amount of computational power; but this is the price to pay to have a totally secure network without the need for a centralized body.
Other Uses Of Blockchain
The implementation of blockchain within cryptocurrency is well-founded, but its use extends far beyond that.
It can be applied to any database where the exact time the data collected is vital to understanding how to read the information.
For example, food distributors can use blockchain to trace the journey that food products undertake. This helps to know where any outbreak such as e-coli or salmonella may occur. It also allows the company to track any exposure to other harmful materials.
Medical records can also be uploaded onto a blockchain. Because it’s unchangeable once it’s uploaded, patients have peace of mind that health care providers are not manipulating their data after the fact.
However, the information can be stored in a private manner which means only select people can access it.
Blockchain has also seen use in banking, voting, supply chain, and even national defense. Its uses are extensive, and it will no doubt become even more prevalent over the coming years.
All that being said, you’re almost certainly here to understand blockchain’s usage within cryptocurrency. The most important thing is to understand that the technology is highly secure and not editable once a block is minted.
Next up, we’re going to take a more in-depth look at exactly how a blockchain transaction works.