Everything you need to know about blockchain, including smart contracts, distributed ledgers, private and public keys!
Blockchain technology is similar to an encrypted excel or spread sheet that has been duplicated over a network of computers which updates regularly. All information on the Blockchain database is shared and reconciled. This technology provides a safe and secure transfer from one individual to another individual. (Or business-to-business.) Blockchain guarantees the validity of all economic transactions by recording them on a distributed database of nodes.
These nodes (computers) are all connected through a secure reconciliation and validation mechanism. Blockchain also known as a distributed ledger can be programmed to record economic transactions. This technology does not need a third party to verify or act as an intermediary. Blockchain is a combination of two main technologies, private key cryptography and a system of an incentive payment or concession i.e. mining.
Who created blockchain?
Blockchain was invented by Satoshi Nakamoto.
Benefits of blockchain?
Blockchain technology is transparent and can not be corrupted. It is not controlled by a single individual or company. The database is not stored in any one location instead it is hosted by computers all over the world. Records are public and are easily verified. As a result the database can not be hacked or corrupted as it is decentralised (No centralised unit). With this technology there are no more missed transactions of value, no more machine glitches or human errors.
What is a distributed ledger?
Ledger is similar to a shared document or spread sheet. Distributed is when this spread sheet is updated simultaneously by many individuals who connect to it using computers which validate transactions.
What is a block?
Each transaction is referred to as a block.
What is a network of nodes?
A network of nodes also referred to as a network of miners. These are computers connected to the network using software that perform the task of reconciling and relaying transactions voluntarily. The work that the node does is referred to as mining. The incentive is payment in crypto currency. Therefore Blockchain is a network of nodes or administrators and a node is a computer.
What is decentralization?
A large global network of computers that jointly manage and verify database transactions. There is no central government, company or authority. In essence it works similar to a peer to peer network.
What is a key?
A large randomly generated string of numbers is referred to as a key.
What is a public key?
A public key is the users address on the Blockchain. Cryptocurrency sent across the network is recorded as belonging to that user.
What is a private key?
A private key is similar to a password, this gives the user access to their cryptocurrency. It is important to safeguard your private key.
What are smart contracts?
Distributed ledgers (decentralised spread sheet) allow the coding of contracts that will execute when certain specific conditions are met. Ethereum was built for this objective, it is an open source Blockchain project.
What is open source Blockchain?
Open source is software where the original source code is freely available and can be redistributed and amended.