What is a Blockchain?

Blockchain technology is actually not as new as most people might think. While there could be arguments on the true origination of Blockchain technology, we will use the initial release date of Bitcoin, January 2009

Blockchain technology is not as new as most people might think.  While there could be arguments on the true origination of Blockchains, we will use the initial release date of Bitcoin, January 2009.  Bitcoin is not "the" Blockchain though.  It's transferred on top of a Blockchain, which is very important to remember.

Before we get into what a Blockchain is though, let's figure out why they are important.  If Blockchains weren't important we wouldn't need to know what they are after all.


What are some of the benefits a Blockchain offers that make it important?

  • Consumer Banking -  There are no overdraft fees because it is impossible to transfer more than what your Wallet has.  Transactions are being posted 24/7, so there is no cut-off time for deposits or withdraws.  There is more than just a password between your account and a hacker.  A private key file must also be present when signing a transaction and transferring from your Wallet.  Wallets will be covered in a future post, so stay tuned!
  • International Transfers - Fees become almost non-existent and transfers happen within minutes from your own home.  There is no need to go to a bank or fill out wire forms and pay high fees.
  • Transparency, Transparency, Transparency -  Transactions can be seen on any Block Explorer (more info coming soon!).  The transparency allows anyone to see where a local government or charity group is spending their money.  Audit teams will benefit greatly because it cuts out any 'accidental' or 'forgotten' accounting entries.
  • Trustless Exchanges -  Payments over a Blockchain are verified through the use of algorithms and the consensus of all nodes connected.  This means someone cannot send you money that bounces a few days later.  They can make a transfer right there on the spot, and if it failed you would know they did not have the money.  The real star here though will be Smart Contracts because they can act as an Escrow.  Each party can send their end of the bargain to the Smart Contract, which will verify the assets are as expected and then pass them on to the new owner.  It can just as easily return the assets to their original owner if the other person does not hold up to their end of the deal. So, what is a Smart Contract?
  • Micro-Transactions - A La Carte purchases can become even more 'micro'.  Don't want to pay $10 a month subscription to that site?  That's fine, you now have the option to pay $0.05 for each article you want to read.  A music artist can sell their songs without needing a middle-man.  This means as soon as a user clicks download, your account instantly receives its money.  This also allows the artist to essentially be paid in real time, without waiting 2 weeks or a month for a paycheck.  Go ahead, send me a couple wei or satoshi and see how easy it is!  Don't know what those are?  Check back soon!
  • Security - A Blockchain is distributed across a network of nodes, which means 1 central body does not maintain it.  Because of the Blockchain's distributed nature, fraudulent transactions are almost impossible.  The distributed nature of a Blockchain also means that any malicious attack would need to gain control of 51% of the network (more info coming soon!). 

 

Blockchain Basics

The simplest explanation is that a  Blockchain is a distributed database.  A Peer-to-Peer (P2P) network of computers, called nodes, maintain the Blockchain by storing a copy of that Blockchain's records. The nodes will verify transactions as they are presented on the Blockchain.  This ensures no 'over-drafting' or double spending.  If the nodes agree a transaction is valid, it executes, then combined with other transactions, and stored in a 'Block'.  This block is then appended to the Blockchain (name make sense now?).

Real Life Example:

John wants to send Brittany 1 Bitcoin.  When John initiates the transaction, the network of nodes ensures the transaction is valid through the use of algorithms.  If the nodes agree that John has 1 BTC to send and the wallet address for Brittany is valid, it will process the transaction. This would likely finish in ~1 hour since it is on the Bitcoin Blockchain.  Better than waiting 2-3 days with the current banking systems right?

These transactions do not have to be a transfer of a Cryptocurrency though.  A Blockchain could allow any asset that has been made digital to be transferred.  This allows a Blockchain to provide benefits to transfers of Real Estate, Automobiles, Music, Art, etc.  A title or deed could be in your hands in ~1 hour after buying a house or paying off a car loan.  No more waiting weeks for a bank or intermediary to process everything and send it your way.

 

Summary

Blockchains are the next up-and-coming technology that will take Globalization to the next level and revolutionize multiple industries. Currently you will likely hear about transfers of Cryptocurrencies.  As time goes on it will not be uncommon to transfer a variety of assets on a Blockchain  (titles, stocks, bonds, deeds, songs, etc.).  This post was meant to provide a very general idea of what a Blockchain is without going into to much technical jargon. To get a similar introduction to the fascinating world of Cryptocurrencies be sure to check out this post:  What are Cryptocurrencies?

For discussion, what Blockchains have you heard of and which ones do you think will survive and eventually become accepted by the masses?

Add Custom Token To MyEtherWallet

Have you wondered how to see other Tokens besides Ether in your Ethereum Wallet? Check out this guide for a quick and easy way to see all kinds of Ethereum Tokens using MyEtherWallet!

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The Ethereum Blockchain Basics

Ethereum is a Blockchain that has a focus on Smart Contracts and allowing for Decentralized Applications. It is one of the biggest names in the Blockchain universe and has a very strong backing.

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The beauty of cryptocurrency is you can send tiny amounts, which are perfect for tips!

Ethereum Wallet Address:

0xB5cbb1b8A20a086857a95b7F157D3349a1304909

Bitcoin Wallet Address:

18VKKk7bYwEMzsgBTRiDQ2bo9237M9rp1y

 

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