what is blockchain?
What is Blockchain?
Whenever I get asked this question I feel I need to take a deep breath because this can be super confusing for some people to grasp so I will try and make it as simple as possible.
In short, blockchain is simply a distributed decentralized ledger or more simply put a public record of transactions everybody has access to.
Whew, that was rough, we good now to move to the next section?
Just kidding, it's a bit more complicated than that but that's essentially what it is. Whenever someone makes a transaction, it is broadcasted to the network, and the computers run complex algorithms to determine if the transaction is valid. If it is, they add it to the record of transactions, linking it to the previous transaction. This chain of linked transactions is known as the blockchain.
What about Security?
Glad you asked nobody, because I am alone typing this by myself. The security is one of the things that makes Bitcoin and the Blockchain awesome! If you wanted to break into Chase bank you would have to break into chase banks network (which is absolutely not easy btw). If you wanted to steal a penny from the bitcoin network though, you would have to buy or gain control somehow of over 50% of all the computing power on bitcoins network. That would cost hundreds of millions of dollars to do and because it's an open network where everybody can see what's happening on it If a random person came on the network and took over 50% control within 10-30 minutes or however long it would take, obviously everybody would know something fishy is going on and the real network would reject all the fake networks transactions and it would just be a waste of money. Even if they slowly took control of the network it would not be worth it because it would cost billions of dollars to gain control slowly and it would be cheaper just to buy bitcoin.
Is Blockchain also Bitcoin?
Blockchain was invented by Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin. The invention of the blockchain for bitcoin made it the first digital currency to solve the double-spending problem without the need of a trusted authority or central server and called it... you guessed it, bitcoin! The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta. They wanted to implement a system where document timestamps could not be tampered with. In 1992, Bayer, Haber and Stornetta incorporated Merkle trees to the design, which improved its efficiency by allowing several document certificates to be collected into one block.
The first blockchain was conceptualized by a person (or group of people) known as Satoshi Nakamoto in 2008. Nakamoto improved the design in an important way using a Hashcash-like method to add blocks to the chain without requiring them to be signed by a trusted party. The design was implemented the following year by Nakamoto as a core component of the cryptocurrency bitcoin, where it serves as the public ledger for all transactions on the network.
Since then people have stripped the blockchain from the Bitcoin protocol and used it for different purposes. Bitcoin is essentially a really slow database by itself. If you need something that is open, neutral, borderless, that no one controls and that resists censorship then bitcoin is for you!
Private blockchains can exist and they serve their purposes as well. As of writing this, there are over 8,000 blockchain companies trying to create useful products but we will talk about that later.
So how does Blockchain work?
That is a complicated answer and will be explained in more detail in the advanced course. That being said lets try a simplified version. Lets say you send money to Bob on the Bitcoin network. Once you send the money that transaction becomes a part of a block thats not yet on the network. That "block" is not yet on the Blockchain until it gets verified by other users on the network. That block is sent to every node on the network and then the miners verify that transaction and sends it back to the nodes where they will add it to the blockchain. When the transaction is complete the reward for processing that transaction is distributed and the miners and Nodes move on to the next transaction. (see image above)
Whats a Node?
A node is different than a Miner. A full node keeps all the transaction history on their computer. Nodes need hundreds of GB of storage because they are the ones keeping the full transaction history of the blockchain. Miners mine the transactions and keep the results on the nodes. Nodes are essentially there to verify if a transaction is real or not and if it is, they add it to the next block in the chain.