If you've been following banking, cryptocurrency, or investing over the last few years, you've come across the word "blockchain" several times. Cryptocurrency relies on it for record-keeping. It's secure. This article looks at the history of blockchain technology, how it works, and more.
The history of blockchain traces its roots to works described by Stuart Haber and W Scott Stornetta
in 1991. The two talked of a chain of transaction blocks secured cryptographically. The concept was
then worked on in 1998 by computer scientist Nick Szabo. The project was dubbed ‘bit gold’.
In 2009, an unknown person or group of people under the pseudonym Satoshi Nakamoto officially launched Bitcoin, the world’s first blockchain cryptocurrency project.
Blockchain lets people share valuable information in a secure and tamper-proof manner. It achieves this by using a principle that we can break into the following four steps:
Once that's done, a new block follows.
Here are the three main components of a blockchain ecosystem:
Every chain is made up of multiple blocks, and each of them has three core elements: The data, a nonce (32-bit whole number), and hash (265-bit number). The chain randomly creates a nonce when a block is generated. It then creates a block header hash.
These are individuals who mine new coins. The work is often tricky since every block must have its unique hash and nonce. To find a nonce that generates the correct hash, miners use special software to solve complex math problems.
Nodes are electronic devices that maintain copies of the blockchains and keep the network functioning effectively. After mining a block, most nodes on the network must accept the change for it to be added.
One of the most popular myths is that blockchain is
for finance and technology people only. However,
evidence shows that many individuals, companies, industries, family businesses, and more use it for a
wide variety of things. Some of these are:
Cryptocurrencies: Most cryptos, including Ethereum and Bitcoin, use this technology to record financial transactions
Smart contracts: These contracts can be enforced without human intervention.
Financial services: Banks and other traditional financial institutions are pleased to use this to speed up back-office settlements
Energy trading: It's used in peer-to-peer energy trading
Supply chains: There are efforts to use blockchain to track the origin of various minerals and food to the original stores. Shipping and software development firms also use it to manage their supply chains.
Anti-counterfeiting: Some organizations use blockchain to identify counterfeits by associating unique identifiers to shipments, documents, products, and storing records.
Other uses include:
Blockchain takes care of lots of security concerns in several ways. It arranges new blocks, linearly and chronologically.
Once a block has been added, it's almost impossible to alter the contents. The majority can reach a consensus
to make the changes.
The 51% attack is also considered a significant threat to proof-of-work consensus.
If the minority colluding nodes own more than 50% of the mining power, they could take over the network's control and unfairly prevent others from adding new blocks.
The only reprieve is that most miners are not interested in initiating the attack. It requires a lot of money and energy to succeed.
Blockchain is a better solution to storing and exchanging digital value than other options. It's still developing and could be much better in the future.
Blockchain suffers from an image crisis. In the mind of some users, it's
the same as cryptocurrency. They associated the latter with criminal activities.
Moreover, blockchain is still immature, and users are struggling to deal with the following:
What is blockchain technology? Blockchain allows users to record and distribute digital information.
The network had its first real-world application with the launch of the largest cryptocurrency,
Bitcoin, in January 2009.
Cryptocurrencies like BTC use blockchain to record data transparently. They can be used as a medium of exchange and store of value.
A blockchain is a database that collects data and classifies them into groups known as blocks.
Each block has a preset storage capacity. Moreover, the blocks are chained together. On the other,
a database structures the information it collects into tables.
All blockchains are databases. However, not all databases are blockchains.
Blockchain has been around for about 20 years, giving businesses adequate time to scrutinize it.
Experts have implemented and explored many practical applications for innovation. Everyone now
believes it stands to make government and business operations more efficient, cheap, and accurate.
As we head to the third decade, the stage is already set for widespread blockchain adoption. So, the future of blockchain is bright.