BITCOIN MINING EXPLAINED- A non-techy beginner’s guide’
. Surely at some point in these concepts, you must have heard or come across the term ‘blockchain technology
’- the technology underlying all of these concepts. This term has been around and lingering for decades now. Surprising!! Right? But it is now becoming very popular with the recent crypto boom. Many corporations, investors, and venture capitalist are now betting billions of dollars on ‘the blockchain’.
This may sound like something only tech specialist or IT professionals can understand, but I would like to break that impression. I would try to give you the simplest explanation of ‘blockchain’
that a ten-year-old would easily understand. So let’s get to it, shall we?
So, What Is Blockchain?
Firstly, as the name implies, Blockchain is a ‘chain of blocks’, but here we are not referring to your normal brick blocks. Smiles. Let’s try and break it down with this simple illustration.
Imagine a special excel spreadsheet which is shared by every computer in the world and connected to the internet. Every time a transaction happens, it gets recorded onto a row of this spreadsheet. Anyone with a phone or laptop and with an active internet connection can access this spreadsheet. Anyone can view and add a transaction to the spreadsheet, but cannot the information that is already there. This is basically and literally a blockchain. It doesn’t get any simpler. Also, watch this video
Summary The same way our illustration spreadsheet has “rows”, so also a blockchain has “blocks”. S
imply put, a blockchain is a collection of data.
And each piece of data is added to the blockchain by connecting one block after another. This is done in a serial and chronological much in a way row of a spreadsheet follows another row. This series of connected blocks one after the other makes it a chain of blocks,
hence the name ‘blockchain’.
Because it exists on the internet, it is ‘decentralized’. Therefore, a blockchain is
a decentralized global database which anyone anywhere in the world with an internet connection can use and view. This means the blockchain ledger is shared among all computers in the world, not in one central location. And this is why Bitcoin is unique. You can also watch this video on blockchain:
Bitcoin and Blockchain
Blockchain’s first and still most famous application is bitcoin, a peer-to-peer digital currency for the modern, digital age. Bitcoin is created and held on the bitcoin blockchain. Unlike tradition money, you can send bitcoin to anyone and from anywhere in the world without 3rd
party or government permission. Bitcoin’s blockchain doesn’t care whether you are a human or a machine. Thousands of nodes on the blockchain are equally able to verify the legitimacy of payments. That’s why bitcoin transactions do not need any third party permissions and intermediaries like banks. Bitcoin’s recent mass adoption speaks volumes about the inherent worth of the blockchain concept.
How does the blockchain work and why it can’t be hacked?
So now that we understand what a blockchain is, let’s try to decode how the technology works. In my explanations, I will be using the example of bitcoin as many people are familiar with it.
- In bitcoins blockchain, there exist 1MB blocks which contain peer-to-peer transactions. As I explained in the article on bitcoin mining, these blocks are added every 10 minutes. This is done by miners with the help of an inbuilt consensus mechanism called Proof of Work. Each entry is secured in each block is secured by cryptographic math, making it irreversible.
These blocks have unique features like;
Every block has a date and time attached to it.
- They are distributed and decentralized.
Each block has multiple copies placed in several locations.
Anyone with internet access can view what’s on the block.
- They are computationally irreversible.
Every 10 minutes, a new block is added to the blockchain. This makes it computationally difficult to reverse any transaction or commit double spending. Also, bitcoins blockchain is used by millions of users who are running this distributed ledger simultaneously. This is like having millions of copies of bitcoins ledger starting from ‘the Genesis block
’ which Satoshi Nakamoto
mined. Each of these copies contains the history of blocks from the beginning of the bitcoin network. This makes it near impossible to corrupt or takes down the system. Moreover, every transaction is secured by a strong cryptographic math. Anyone who wants to alter the ledger needs to overpower and hack 51% network to reverse the cryptographic math. This means the hacker has to hack 51% of the total number of computer nodes running this ledger at various locations, and all at the very same time.
This would require a practically infeasible amount of capital and computational power. This is what makes blockchain unhackable and tamper-proof.
Bitcoin is only just but one example of the application of the blockchain technology. But blockchain technology could have many other beneficial use cases. These solutions can and are been implemented across many industries to solve many issues.
Why Blockchain Matters?
As we now know, blockchain is a decentralized, distributed, immutable and transparent database of records. This immutability and transparency ensure that there is no need for any third party to look after the database.
To emphasize why blockchain matters and its importance, let’s take this illustration. Consider the example of a landowner from Africa. He bought several acres of land, but unfortunately, during a flood, he lost all the deeds and agreements to the land. Now he has no way of claiming he owns his land. And he had a digital copy of the documents on a governmental database, but that also got destroyed during the flood. Oops!! Unfortunately, now this farmer is at a great loss. But imagine he had filed a copy of the land deed and agreement on the blockchain, Ethereum blockchain for example; he would have avoided these problems. He would have had millions of copies of this agreement distributed all over the world.
This is just only one
out of several scenarios in which blockchain application would be useful. Apart from this, the technology will matter by protecting our identity, verifying ownership and also avoiding double spending of money.
Future of Blockchain Technology
The blockchain is the foundation and mother of the over $300 billion cryptocurrency market. But the success of bitcoin or any other cryptocurrency at all will not decide the Blockchain’s future. This is because The Blockchain is bigger than cryptocurrency.
Some notable shifts in the blockchain ecosystem include;
- In 2016, the blockchain attracted a $1.4billion investment as reported by
- In 2016, Dubai government declared that it will be shifting all of its supply chain onto the blockchain by the year 2020.
- Recently, Ethereum established the EEA – Ethereum Enterprise Alliance and IBM to start work on a hyper ledger.
- More than fifty of the world’s leading financial firms are experimenting with different application scenarios of the blockchain.
Apart from all this, blockchain solutions are been discussed in industries like automobiles, identity management, intellectual property rights, real estate, healthcare, supply chain management and governance [to name but a few].
When all is said and done, only time will tell how disruptive this technology invention of computer science will be. And it is no exaggeration that this disruptive technology will soon be an integral part of our lives. To stay up to date, subscribe to www.nigeriabitcoincommunity.com
and keep learning about bitcoin, cryptocurrencies and the blockchain revolution. Now I would like to hear from you. What do you think about the blockchain technology? What more industries do you think it can impact? What practical applications do you see it been used for? Let’s hear your thoughts in the comments below. And if you found this post informative, do share with your friends on Twitter and Facebook!
I very sure that by now it is safe to assume you must have heard about ‘bitcoin’ and ‘cryptocurrencies’. You may have also heard about ‘bitcoin mining’, if not, you can read ‘