Hello and welcome my name is Donavan and this is a segment that I call CryptoBasics where we will explore what I believe are the essentials when it comes to understanding the cryptocurrency and blockchain space. I hope I can provide everyone with the most concise and easy to understand explanations regardless whether you do or do not have a background in finance, computer science, or engineering.
So what better way to start our conversation than understanding What the Hell is Blockchain?
We hear it a lot and for many it is still this mysterious, unattainable insight. Well, it's not mysterious and although the technology from a technical standpoint is quite complex, it is actually quite simple in theory.
Blockchain is a distributed database or online ledger that is used to maintain a continuously growing list of records called blocks. Each block has a timestamp, and a link to a previous block. This chain of blocks are managed by a peer-to-peer network that follows cryptographic protocols to validate new blocks
This form of digital ledger can be used for various purposes and in the case of BITCOIN, which i am sure many of you have heard of, it is used for transactions on the blockchain and is recorded chronologically and publically. A form of digital currency if you may.
Bare in mind, the blockchain is not only capable of recording digital transactions but VIRTUALLY EVERYTHING OF VALUE.
If everything I said so far still does not fully make any sense, well, there is 1 analogy that I really like from cointelegraph.com called the;
GLASS DEPOSIT BOX ANALOGY
Imagine a 24/7 Bank Vault that is filled with row upon row of unlabelled deposit boxes. However this Vault is open for anyone to enter with every deposit box having a glass frontage for everyone to view its contents but not access it. Opening a new deposit box gives you a unique key. Although you own that deposit box, it is not under your possession but you have the ability to access its content at any time.
An oversimplified way of explaining the blockchain and bitcoin it might be, but that is essentially what it is.
So, WHY THE FUSS? What are the benefits of having such a technology
For starters, it is a decentralized system. Decentralization basically eliminates having to deal with third-parties (i.e banks, corporations, governments) that take a big chunk of fees. Apart form that, the network is not controlled by one central authority and instead operates on a peer-to-peer basis. Basically people have control over the information, asset, and currency that they own on the blockchain.
With, decentralization comes transparency. Because it is a single public ledger lives in a state of consensus, the data is automatically validated periodically, allowing for a self-auditing ecosystem. This also reduces the clutter of multiple ledgers
and also makes blockchain EXTREMELY SECURE.
Hacking is near impossible due to the nature of it being a distributed ledger rather than a centralized system.
IMAGINE THIS: If someone wanted to hack into a particular block in a blockchain, they would not only need to hack into that specific block (which is encrypted using high level cryptography) but all of the previous blocks going back the entire history of that blockchain. Is that it? UHMMM, and they would need to do it on every ledger in the network, which could be millions, SIMULTANEOUSLY.
FInally, TRUST. Blockchain’s decentralized, public, and cryptographic nature allows people to trust each other and transact peer-to-peer, making the need for intermediaries obsolete. WHY DO THINK MORE AND MORE BANKS ARE TRYING TO GET IN ON THIS TECHNOLOGY??
So, whats the catch? There must be some cons to using a blockchain. WELL OFCOURSE THERE IS, NOTHING’s PERFECT.
One of the threats to a blockchain, mainly on the Bitcoin network is the 51% Attack
Although extremely difficult, it is theoretically possible. The 51% attack is when a miner or group of miners control more than half or “51%” of the network’s mining hashrate, or computing power allowng them to halt payments between some or all users.
To learn more about this, there is a link in the description below from Investopedia has a great article on this that goes into more detail about the 51% Attack.
Alright, before I end this posy, I would like to provide you guys with some common terms that is used a lot in the cryptocommunity and their definitions. For the sake of time, I could not list every common term, and if you have questions please feel free to leave a comment below.
ALTCOIN: any coin that isn’t bitcoin
BLOCK HEIGHT: the number of blocks connected together in the blockchain.
BLOCK REWARD: reward that is given to miners for solving the math equation related to a block
FORK: a permanent divergence of an alternative operating version of current blockchain
HALVING: reduction of minable reward every so many blocks. Bitcoin halves after every 210,000 blocks.
HASHRATE: speed at which a block is discovered and the rate at which the related math problem is solved.
MINING: when a block is discovered and solved along the blockchain
MULTISIG: having more than one signature to approve a transaction
NODE: a computer that is connected to a bitcoin network, a collection of nodes is called a master node.
Thank you so much for watching this video and I hope this provided many of you with a greater understanding and appreciation for blockchain technology.
Until next time, this is Donavan Signing out.