What is Block Chain?
In Layman term, Block Chain is a kind of data structure which holds the date of a distributed shared ledger. Data is stored in a data bundles called Blocks and these blocks all together creates a chain. Data in this chain holds the record of all transactions ever happened over the network.
As mentioned in below screen shot, Data holds by each block is the transaction records which has been occurred on the shared ledger.
Example: If After Block#1 creation Bob transfers value = 10 to Dev then Block #2 will hold the information about this transaction and when block #2 will add to chain Ledger will also be updated with a value balance Bob = 90 and Dev = 20.
Evolution of Block Chain:
All it started with World Wide Web an Client Server based architecture, where there is a central server host all the data and services and clients can connect and utilized these services. This architecture has it's own advantages and disadvantages
• Higher Transaction speed
• Tight control over system
• It has its own limitation like processing scalability till an extent
• More vulnerable to attacks
• Higher Down times as single point of failure
• Higher trust deficit
• Low transparency
Then came Peer to Peer architecture with some popular applications like Napster (1999) and Bit torrent (2001) a general purpose p2p file sharing network.
Not all applications does make sense for this architecture but it has its own advantages over centralized.
• Can be Scalable to a larger extent
• Less vulnerable to attacks as there is no single point of entry
• Very low or no down time as no single point of failure
• Higher trust and transparency
First Block Chain Application
In 2008, Satoshi Nakamoto released a white paper (https://bitcoin.org/en/bitcoin-paper) on "A peer to peer electronic cash system" and the unit for value transfer over the network was coined as BitCoin.
Bitcoin is an open source P2P application that supports exchange of digital value known as bitcoin.
As it is digital is it does not exist like fiat currency instead it lies into bitcoin network in the form of an entries on shared ledger.
A Brief History
And how BitCoin work
It’s a Public network, anyone can join, host a node and own a bit coin address without any central authority. Users of the network are identified by their Public key. Which is assigned during a bit coin address creation. Private Key should be kept secret by the users.
Each coin has an identity and an owner. In bitcoin network there is no central authority like generally we have for Fiat currencies. The algorithms, Cryptography and Mathematics decides how the bitcoin transactions should be validated and allocated.
As the network is public, its ledger is also public and any one can view the transactions happening over the network using block chain explorer tools like blockchain.info But it does not holds the personal information like Name, address etc. which are generally a key information when we use a traditional banking services.
Like Visa or MasterCard, Bitcoin network also has some processing fee but it is very little when compared with centralized services. Now the question is who get paid with this fee and the answer is the nodes in the network who are validating the transactions.
What’s coming Nxt?
Indeed Bitcoin is the 1st Block Chain based application, which had opened the door for further innovation and as result of that many new network came into existence which are solving more real world issues. The most known one is Ethereum Block Chain. We are going to discuss more in details about in in upcoming sessions.
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