Bitcoin, explained in a nutshell
an online currency, or ‘cryptocurrency’ with an electronic security system, run
by a massive network of individuals.
benefits of each user having ownership in this currency is rather clever in its
practical and democratic value, giving back responsibility for what is
essentially owned by the people. This shifts the traditional, ‘please Sir, can
I have some more’, mentality which is, of course a self-endorsing formula
sustained by the multinational banking corporations worldwide.
however, is a self-fulfilling, endless concept, founded securely on mutual
trust with a ‘share-holder’ sense of ownership; it rewards creativity,
risk-taking and game-changing perspectives with financial security routed deep
within its core.
others – who are seemingly strangers – with your money sounds preposterous, but
with Blockchain data as security it becomes extremely impregnable.
is so protected in fact, that it has the potential for storing any kind of
digital information imaginable. Systems like Bitcoin could indeed be the future
of all secure digital transactions both nationally and internationally.
What is a Blockchain and how does Bitcoin
relate to it?
Blockchain is quite simply a chain of blocks which contain information held
within a digital platform. Originally, a methodology in 1991 by a group of
researchers intended to time stamp digital documents to avoid backdating and
tampering, such as that of a notary.
mostly unused until it was adapted by Satoshi Nakomoto in 2009 to create a
digital cryptocurrency, Bitcoin.
Blockchain is a distributed ledger and fundamentally open to anyone. Once the data
has been recorded inside a Blockchain, it becomes very difficult to change it.
looking at a ‘block’ we can see that it has three main components; data,
hash and hash of previous block, which in turn creates the chain. The data
stored depends on the type of Blockchain it is.
example, uses Blockchain technology to save details about a transaction in the
block, such as; the sender, the receiver and the amount of coins. This gives
you the security, privacy and confidence to use this platform.
also has a hash, which is electronically comparable to a
fingerprint, an electronic identity if you will…
identifies a block and all its content. Each hash is
unique, non-replicable and individualistic.
block has been created, its hash is calculated. Changing something inside the
block will cause the hash to change, so in other words, hashes are very useful
in the detection of highlighting changes.
element inside each block is the hash of the previous block,
which effectively creates the continuity needed for the chain. It’s essentially
this process that makes the Blockchain so secure.
Security against tampering within a
If a block
is tampered with, the hash of the block will change, therefore making all
subsequent blocks invalid, as they no longer have a valid hash from the
hashes alone is not enough to prevent tampering, so to mitigate this,
blockchains have something called ‘Proof of Work’, which slows down the
creation of new blocks.
this process takes 10 minutes. This mechanism makes it very hard to tamper with
the blocks, because you’ll need to recalculate the ‘Proof of Work’ for all
then, it’s incredibly secure, which comes from its creative use of hashing and
the proof of work mechanism.
one more way that blockchains secure themselves, and this is by being
distributed using the peer-to-peer network, rather than a central approach.
Everyone can join, and this immediately installs a sense of ownership; vested
interest and trust within each user.
successfully tamper with a blockchain you’ll need to tamper with all the blocks
of the chain, redo the proof of work for each block and take control of more
than 50% of the peer-to-peer network. Only then will a tampered block become
accepted by everyone else. Naturally this is all but impossible, which is
fantastic for enhancing user confidence.
The future of Blockchain
All we can
be sure of is change, and the Blockchain is constantly evolving. Recently there
have been several developments such as ‘Smart Contracts’ used for exchanging
coins based on certain conditions.
technology can be used for other things like storing medical records, paying
for services such as online tutoring, creating a
digital notary or even the collection of taxes.
About the author
David Bailey-Lauring is a single father of three boys and a content writer and
regularly writes about sport, business, education and tech in the UK, USA, and