Blockchain Basics: Step by Step Beginners Blockchain Breakdown
What is a blockchain? It is a distributed database that keeps and controls data about all transactions, which are added by system participants.
Blockchains have intrigued investors because they represent an advanced technology that can significantly reduce transaction costs. But when blockchain hype passed, other technology adoption challenges became apparent. The first issue among several ones was scalability. Nowadays, many distributed ledger systems (DLS) are not able to process a wider amount of transactions. In fact it brings a deceleration in turnover and, of course, transaction processing.
One of other problems is security and it is because of the quasi-anonymity. Depending on the type of blockchain hacker attacks can be possible. Nevertheless, it can be defenseless to the popular "51% attacks" . What is happening? Users with stronger computer power can have access to the system and can modify the records in a particular blockchain.
Those who are still “newbies” in this world, may think their functioning is attached to something mystical. Few may doubt that the variety of possibilities for blockchain technology use (plus cryptocurrencies) is truly enormous.
Blockchain can be considered as one of the cost-effective and safest ways to record activity and keep data up-to-date while keeping a record of your history. Blockchain is also recognized as corruption-resistant, therefore it is chosen by many companies.
Nowadays, first introduced in October 2008, blockchain technology is preferred by many financial institutions around the world and large companies adhering to new trends. The companies explore ways to implement blockchain technology in business and today, 81% of the top 100 public companies select blockchain technology, and work on the improvement of the above-mentioned issues.
Blockchain is an innovation that attracts many business sectors, but many do not know simple blockchain basics, like how it works and what connection it has with crypto. This article should help those people who want to dive deeper into blockchain technology, and for beginners looking for hands-on tips on this innovative technology.
Blockchain basics for beginners in the tech world
Literal meaning of the word ‘blockchain’ is a continuous chain of blocks. First things first mentioned in the informative and educating blockchain basics is the terminology part, which identifies blockchain as a distributed ledger technology. This means that the technology contains and controls the transaction data. Unlike other database options, the transaction data cannot be modified, edited or changed, and in fact blockchain’s responsibility is adding new transaction records. Moreover, the stored data in the system is safe, it will never be lost, even though all the computers fail.
Briefly, this tech innovation is a more progressive system of a database that presents a clear information exchange throughout a business system.
Thanks to the integration of technological resolutions, blockchain comes with several distinctive features, such as openness, immutability of stored data. All these aspects indicate that the blockchain is not just an interesting and promising technology, but a truly unique technological solution that practically makes it possible to implement the idea of absolute decentralization.
In the long run, various individuals and institutions pick the blockchain technology as it is a new sort of database ledger. It also helps to track all the orders, invoices, payments and other transactions. The system comes with an inbuilt mechanism with security that hinders the entries of unknown transactions.
How is blockchain related to bitcoin?
Any trustworthy blockchain basics guide will inform that these two giants in terms of functionality are totally different and dissimilar things, but these two have a history together.
In blockchain basics, a general term that describes the huge system that Bitcoin utilizes to securely pass its transactions is blockchain.
Blockchain data should be updated regularly, as they keep in balance the incentives on the system, which afterwards will help to maintain security and right capacity. The following economic balance ratio keep the virtual currencies enough decentralized and autonomous of an individual’s control.
All Bitcoin transactions are based on blockchain technology, which is working exceptionally in an electronic way, and its free of any regulation or distribution. Bitcoin can authorize P2P transactions without an intermediary body, while helping users to avoid from any type of fraud or cybercrime, and all this by having the blockchain as the main system.
Top programming languages for blockchain development
Blockchain basics insists that transparency is the best characteristic that describes this technology. It is unique because the blocks are not possible to fake or imitate, and this is the superb reason why blockchains are in demand mostly in banking, finance, retail and other spheres. But actually, Blockchain first became well-known when it was used in the execution of Bitcoin.
After all, everyone’s priority goal is to securely keep their funds, and consequently good blockchain developers are highly demanded. Mastering the best programming languages to write a new blockchain will be much appreciated over other developers.
One other significant blockchain basics point to include is the information about the programming language that developers use. C++ is the most popular one among others that best blockchain development companies use. Moreover, Bitcoin was the first currency initially written in C++.
This programming language is multipurpose that has important object-oriented features. In case, there are other similar programming languages in the tech world that are also being used while developing blockchains. The top list includes
3 types of blockchain
The realest blockchain basics, should continue with the explanation of blockchain types:
This chain of blocks can be accessed by everyone who wants. Moreover, anyone can send transactions and wait for them to be included, but with the obligation to be valid, and participate in the process for determining which blocks can be added to the chain.
As a quasi-centralized trust, this type of blockchains are protected by a unity of economic incentives and cryptographic verification. This phenomena is considered to be completely decentralized.
Fully private blockchains
This is a phenomenon characterized by having a restricted level of admission to data. Confirmation of transactions in such networks, auditing, database management is available to a wide range of people. The unique right to have access the data can be either public or completely limited.
The general characteristics of this blockchain type is that it can be controlled by several companies. Pre-selected companies share out the responsibility for controlling the blockchain and protecting the access rights to stored data. Industries and main spheres where different organizations exchange the same purposes, and take advantage from common responsibilities, opt to use consortium blockchain systems.
The 3 leading components of a blockchain technology
Blockchain can be considered as a combination of different technologies. By themselves, they may not be new, but the way they were combined and applied turned out to be new. In the main list of blockchain basics there are three important components:
- Public key cryptography
- Distributed ledger
- Smart contracts
Private key cryptography
To understand the technology behind private key cryptography, it is useful to imagine two people who want to make a certain online transaction. Each of them has a set of 2 keys, where the one is private, the other is public. The duo of both keys allows participants to form a secure digital point of identification, which is an influential component of blockchain technology. In other words, together these two keys build a digital signature, a useful tool for authorization and control.
Distributed ledger is working with the digital signature which in fact is an encryption element. The process is accompanied by a strong verification and is furtherly utilized to keep stronger the network’s security.
One of the significant processes in blockchain transactions confirmation and verification process. Above mentioned example with two people wanting to conduct an online transaction, each having private and public keys, the first person can use his private key to tag the transaction information to the second person’s public key. In fact, this information creates a block that contains a digital signature with a timestamp and other necessary information for this transaction.
The 3 core principles of blockchains
Blockchain basics include also the three main principles that the innovative technology sticks to:
The first principle is decentralization, which is connected to control and decision making, which is obtained by an individual/organization. Decentralized blockchain networks are working only transparently in order to decrease the demand for trust between members. This first principle that the technology follows, also keep members from feeling and using the power to monitor over each other. In result, it can destroy and ruin the functionality of technology.
By saying immutability in blockchain system, they mean that nothing is subject to be changed. Members cannot interrupt transactions after it was written in the shared ledger, and in case the record of transaction was faulty or contained any error, editor should make a new transaction addition which will solve the mistake. But anyway, both transactions will be visible on the network.
The blockchain technology makes some rules concerning the consent of participants to keep record transactions. Members may do that in an exceptional way when the network participants provide their consent.
The 2 greatest blockchain product examples
What an in-depth blockchain basics article, without any significant examples of blockchain products.
Blockchain and Bitcoin? Yes, these two have the most successful and powerful connection! In blockchain basics there should be noted two most popular blockchain products - Bitcoin and Ethereum. Anyone who is interested in these digital currencies can make a connection with the blockchain and complete transactions on them.
This super famous name can tell a lot. Bitcoin is the most valuable digital currency, and also it is one of the first currencies for which a certain issue limit was originally set.
Someone under the pseudonym Satoshi Nakamoto created this cryptocurrency and founded the technology for its generation and management, in 2008 Nakamoto set the maximum number of bitcoins originated by a distributed network of computers at 21 million. Such a restriction on the supply of bitcoins ensures the demand for a monetary unit, which in result gives an increase in price.
If first and most expensive crypto was Bitcoin, the second largest is Ethereum. It is somewhat alike Bitcoin, but while creating it, the main intention was to create something more versatile than just Bitcoin.
Ethereum was cultivated to become a totally different Internet-style network, moreover, unlike Bitcoin, it has its own programming language - Solidity, which theoretically gives the allowance to create any program using the Ethereum network. This type of programs are called decentralized applications and theoretically are persistent to government control.
Ethereum is popular for its "smart contracts", which means contracts are being executed automatically, and the many programs created on the Ethereum network through Solidity programming language. While Ethereum's purposes surpass its main abilities, the network is overpopulated and slow, and the involvement of Solidity makes Ethereum programs defenseless. Nevertheless, in spite of its shortcomings, many developers see Ethereum as a motivating and inspiring instance of an up-to-date programming paradigm.
Top 3 leading blockchain companies
While discovering blockchains, one should know what is also included in the blockchain basics. This is about the companies that use blockchain technology and currently the biggest blockchain company.
After reading about all these blockchain basics, it is definitely an important point to talk about the leader company that uses blockchain technology.
Coinbase Global Inc.
Nowadays, Coinbase Global Inc. (COIN), is one of the leaders in the industry and it has $3 billion in net income and about $6 billion revenue. This company is also included in NASDAQ and has a market cap of about $53 billion. The company was founded in June 2012 by Brian Armstrong, a former Airbnb engineer, along with the co-founder Fred Ersam, who was a former Goldman Sachs trader.
Coinbase Global company performs in the financial sphere and provides special transaction services and technologies built for the crypto market and various crypto trading bots. This platform’s main purpose is to give allowance to its retail users, so they can invest, spend, save, earn, trade and use cryptocurrencies.
Monex Group Inc.
The second largest company is Monex, which is a Japanese online financial institution. The company manages online-based retail brokers in different countries such as Japan, China, United States and Australia. Monex Group has also other services for its customers such as asset management, investment training, M&A advisory, forex and also cryptocurrency exchange.
The third biggest blockchain using company provides high level computing solutions, more detailed, Canaan Inc. develops high-performance computing chips for application-specific integrated circuits, manufactures and improves computing equipment and also software services. Moreover, the company offers its customers a wide range of artificial intelligence (AI) services and engages in the research and development of cutting-edge technologies, and more.
How is blockchain used in daily life?
Blockchain is a fully new technology type and system that is used in an innovative way by different industries of a daily life. Blockchain basics have separated a few spheres where blockchain is also used:
Companies working in the energy industry mostly choose blockchains instead of other technologies, as it comes with the useful opportunity to build P2P trading platforms and gives the direct connection to the renewable type of energy.
Media and Entertainment industry
Companies and organizations working and developing in this industry select blockchain technology as it will find out the copyright data. Copyright verification and plagiarism check is very important for artists. Also, blockchains in media are required to catch any transfer of copyrighted content.
Nowadays, financial systems including banks, stock markets or other investment companies do not miss the tendency of using blockchain technology in business, as it will be a great assistant in organizing market trading, transactions and online payments.
Companies in the retail sector also choose using blockchain technology. It helps them to be aware of the interaction between customers and suppliers.
Blockchain technology gives people every reason to believe that there is great potential for future applications. A genius concept of someone called Satoshi Nakamoto became a whole technology with a lot of directions, which started rule a huge part of a digital world. The introduction of blockchain technology is a significant and mind-blowing step towards innovation in digital world and digital currencies. Blockchain is a shared immutable ledger that makes easier the whole process of recording transactions and keeping track of assets in the business network.
Note that anything that has a value can be tracked and traded on the blockchain network. People usually choose this option as it reduces risks and costs. Meanwhile blockchain technology was first used in the financial word, specifically for the support of a digital currency, today it is being used in various business spheres and areas.
But, as with any promising technology with vast potential, it's hard to tell right away what the best way to apply it will be. Time passes, and “experiments” with possibilities will certainly continue - both in terms of finding new ways to use it, and in terms of improving the efficiency of those already in use.