Blockchain and Bitcoin: The Basicsguides
If you're reading this there's a good chance you're familiar with Bitcoin. However, you may not know much about the technology on which Bitcoin resides, the blockchain. While the technical aspects of blockchain technology can be intimidating, it's not too difficult to get a high-level understanding of how it works.
For starters, Bitcoin is one of the most notable blockchain platforms. But what is the blockchain and what is it good for? Keep reading and we'll tell you all about it.
What is a Blockchain?
The basics of blockchain and Bitcoin begin by knowing what a blockchain is. The simplest way to think of a blockchain is to think of a ledger. In this case, the ledger is digital and the transactions that take place on it are shared throughout a distributed peer-to-peer network.
This network is comprised of and maintained by many computers, referred to as nodes. As these nodes agree and confirm transactions, sets of data (aka blocks) are linked together into a digital chain. All nodes on the network maintain a copy of the chain, thereby ensuring all transactions are legitimate and verified.
How Does the Blockchain Process Work?
Let's break it down and take it step-by-step. We'll use the Bitcoin blockchain as an example.
A transaction occurs
When a transaction occurs on the Bitcoin blockchain, it is sent to all nodes (computers) on the network. Nodes then verify and validate the transaction. So long as no nodes on the Bitcoin network suspect fraud, the transaction completes and a new entry in the ledger is recorded. This step in the process happens in a matter of seconds.
Transaction information is gathered and logged
Data pertaining to cryptocurrency transactions that occur on the blockchain are logged and assembled. This information includes the date, time, amount sent and received, sending and receiving addresses, and digital signatures. All of this is stored on the blockchain.
Distribution of finalized block
When a block in the blockchain is finalized, it is then sent to all the nodes on the network for verification and confirmation. Because of its decentralized nature, all operators on the blockchain must come to a consensus before the block can be completed and added to the chain.
Nodes validate the block
Nodes on the network use software that works to solve a complex algorithmic problem. When a node successfully solves the equation, it is rewarded with new coins from the blockchain. This is a part of the mining process involved with the Bitcoin blockchain, also known as Proof-of-Work. Once a block is validated and added to the chain, nodes begin working on the next block so as to avoid duplication.
The block is added
Once the block is validated and added to the chain, it gets a distinctive timestamp, along with a code that identifies the block. This code is referred to as the "hash." The newly validated block also makes note of the previous block's hash, which is how the blockchain creates immutability and order.
Completed transactions are added to the ledger
When the completed block is added to the chain, all updates are sent to members of the network. The immutability of the ledger is verified by ensuring the block hashes match. Upon validation, a new block begins.
Bitcoin and the Blockchain
We previously discussed that Bitcoin and the blockchain are not the same. Blockchain is the general word used for the technology upon which Bitcoin and other cryptocurrencies are built. Any digital currency that exists on a blockchain uses the same distributed database method as the one outlined above.
Every node on the network maintains a copy of the blockchain that is regularly updated. This way, everyone has the latest version of the blockchain network possible. This creates trust and balance across the blockchain, which allows the network to be entirely decentralized. As a result, cryptocurrencies are independent from the control of any financial institutions or banks.
Additionally, due to its decentralized nature, the blockchain can remain operational even when being attacked. That means even if one part of the network were going through technical difficulties, the rest of the blockchain can carry on. This ability to remain intact is just one of the many advantages blockchain technology has to offer.
By comparison, Bitcoin is a cryptocurrency that uses blockchain technologies. It "resides" on the blockchain, if you will. Bitcoin is only available in a digital format. There is no physical representation of Bitcoin. However, Bitcoin does not rely on banks or other financial institutions for distribution or regulation. Users can purchase Bitcoin from one of many cryptocurrency exchanges.
Additionally, Bitcoin can perform peer-to-peer transactions. With traditional finance, if you want to send money to someone, you typically have to go through a bank (unless you're using cash of course, but you still have to get that cash from somewhere). Using Bitcoin, the funds go directly from your account to another account, without the need for a middleman.
While the blockchain is most widely known for its role in cryptocurrencies and digital tokens, this revolutionary technology has other uses.
With the blockchain, supply chain management becomes much simpler and more transparent. The ability to create timestamps and audits of the entire supply chain process reduces overall costs and establishes trust between the producer and the client. Additionally, with by using the blockchain and ensuring visibility throughout the process, clients may be more likely to select one vendor over another.
By using the blockchain in the healthcare industry, hospitals, emergency care, and other health-related facilities as assured of secure, private, and efficient record-keeping. With data that's quickly and easily accessible, the healthcare industry can eliminate the need for paper while focusing on giving top-quality care to their patients.
Insurance and Real Estate
In these industries, smart contracts utilize blockchain technology to ensure the integrity of data and disbursement of funds. Smart contracts are great for real estate as they execute when specific parameters are met. For example, if two parties agree on the price of a house, they can set a date and when these criteria are met, everything completes automatically.
Using smart contracts on the blockchain is a great way to eliminate technical and human errors that occur in these markets. It also helps reduce the risk of scams while increasing efficiency.
Start Your Bitcoin and Blockchain Journey Today!
Now that you understand the basics of Bitcoin and blockchain, it's time to get started by adding some Bitcoin to your wallet. You can do that byvisiting one of our 6,772 Bitcoin ATMs, spread throughout the United States and Canada. It's a quick and pain-free process and before you know it, you'll have Bitcoin in your wallet.
Nov. 21, 2022