Bitcoin is the ultimate talk these days. By this time everybody knows bitcoins are digital currencies run by a network people, and that can be sent without any clearing house. It’s not controlled by any issuing authority like the goverment or a bank. Being only around 9 years old, the bitcoin is the most highly valued cryptocurrency out there in the market. Blockchain is the core technology of bitcoin. But what is bitcoin & blockchain? Also how does it matter?!
What is bitcoin and blockchain?
In simple format, blockhain is the combination of math and cryptography! Its a set of blocks which contains values inside it and are chained together. Precisely, cryptography is the art of writing or solving codes. It helps in creating a particuar encrypted data that can only be processed by a reciver for whom it is intended to. The converted data by an unauthorized user will be mismatched or maybe presented with the encrypted format which will be totally unreadable.
Modern form of technology has allowed humans to transact files of all possible formats with the help of internet and network sharing, no matter how far they are. Yes we also have transacted money with the help of online payment gateways. But the only thing is that, there isn’t any instant transaction of money that’s happening, as they need to be verified by a 3rd party authority. Which might involve high transaction costs and requires a lot of documents to be submitted in prior to gain access to online transaction.
THIS IS WHAT THE BLOCKCHAIN TECHNOLOGY IS TRYING TO SOLVE BY PROVIDING OPEN DECENTRALISED DATABASE.
Blockhain technology is going to completely change the way we had been transacting data. It has an upper hand of security by avoiding financial frauds, because all the transaction data are noted on a public ledger, of which one copy is stored on the personal computers of every node on the blockchain network. And which means anyone, anywhere having internet access can view the ledger. Infact the ledger contains information of every transaction from the very beginning dating back to the very first bitcoin transaction. Leading to a total size of 150 GB of DATA as of Jan 2018!
But how can an online database, that shares its ledger stays hack proof? The answer is its millions of users. Its like every ledger copy is available on the personal computers of every peer on the bitcoin network. So nobody can cheat on writing the data to the ledger. Infact Every block of data has a timestamp and also has a link to its previouse block, and it maintains them in a chronological order. The data can be viewed and added, but cannot be edited. Which is done using cryptography.
SHA-256 Cryptographic Hash Function:
One of the major implementations of block chain is the bitcoin cryptocurrency. For which now leads us to the concept of bitcoin minning. The bitcoins that are sent from A to B are verified by bitcoin miners, by solving a series of specialized math problems. In order to decide which block should be added to the blockchain, a serious contest is held between miners. One has to solve certain math problems created by a cryptographic hash function. More specificaly, the SHA-256.
There is no possibility to solve this problem logically, rather by a series of guesses, the answer can be obtained. Consider it like a combination of string on which guessed rightly will allow you to add the block to the blockchain and get you rewarded with bitcoins. But like I said it needs to be guessed and no logical solution is available. So it totally depends your computational power, which decides the Hash Rate. The more computational power, the faster you will arrive at the required combination. Also the hash rate is nothing but the number of guesses per second.
HASH RATE = NUMBER OF GUESSES PER SECOND
Each Bitcoin miner is competing with all the other miners over the network to be the first one to mine. Because In exchange for validating the transactions the Bitcoin miners are rewarded with bitcoins of thousands of $s worth. Which also means, rewarding = creation of new bitcoins. Believe me or not currently the number of computers that are minning bitcoins are over 1000 times more powerful than the world’s top 500 supercomputers combined. Which leads us to the conclusion of how secure the Bitcoin network is. Infact for a threat to disrupt the network, they might atleast need half the computational strength, which is definetly not going to be possible.
Each Bitcoin technology can be trusted so long as you know how it works and the trust of the people involved. All of the thefts in recent years have been the result of carelessness on the part of bitcoin owners. Bitcoin is atleast as of now experimental, it might be a good investment or might turn out to be a bubble that can burst out any soon. What are your thoughts on the future of bitcoins? Do share on the comments below.