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What Is Blockchain Technology?

What is Blockchain?

What is blockchain technology?

Blockchain technology became popular because of the Bitcoin boom, this technology involves storing records and exchanging data in an open and decentralized environment, which makes the data and records incorruptible because the data cannot be tampered with and it is automatically backed up over and over.

It is often described as a type of “Distributed Database”, which is used to store and preserve growing list of data records in form of “Blocks”.

I’ll explain what the term “Blocks” mean in this scenario.

The blockchain technology is becoming popular day by day and big companies and corporations have started to take it seriously and are adapting to this new technology which essentially cuts out the middleman in different industries and sectors.

The feature that makes the Blockchain Technology unique is the fact that it is an open ledger that can store records of financial transactions and transference of goods, services.

Anyone who is contributing to the blockchain also ensures that they have the latest synchronized version of the database which contains all the current and previous blocks of data/record.

Since the blockchain technology is relatively new, people are coming up with new ideas and theoretical and practical uses of this technology.

The finance sector is the one who seems to be gaining most out of this new technological advancement. The idea of processing thousands of transactions in a second is really exciting for them.

However, the benefits of blockchain technology are not only limited to financial sector anymore, health sector, insurance sector and even in agriculture and power generation sector are slowly starting to adopt this technology.

Even social media platforms like STEEM have emerged where both Authors and Users are rewarded for their contributions.

How Are Transactions Processed In Blockchain?

Each and every transaction has to be approved by a certain number of “Nodes”. (Nodes are other participants on the blockchain network, anyone can create a node if he fulfills the criteria for creating a Master node.)

What this basically does is, it ensures the authenticity and to protect the records from getting corrupted and to safeguard against potential duplicate transactions and fraudulent activities. This process is automated and doesn’t involve human interaction or coding.

The blockchain continuously maintains the chronological record of each and every transaction that has ever taken place.

The blockchain is constantly growing and as new “Completed” blocks are added to it (which contain records of all the most recent transactions.)

A new block is like a new page on a physical ledger, which contains the records of all future transactions that’ll occur in that specific block.

What is Mining?

You may have heard about Bitcoin Mining or terms like Cryptocurrency Mining. What mining basically means is that new blocks must be discovered or in other words “Mined” in order to facilitate the process of recording data and keeping the ledger up-to-date.

Mining involves many nodes, which consists of computers running and solving complex algorithms. In the beginning people used to Mine on their computers but as the number of blocks started to grow rapidly people started to find new ways for mining cryptocurrencies i.e. GPU Rigs and ASIC Miners which resulted in cryptocurrencies getting popular day by day and now it is becoming harder to mine currencies so newer cryptocurrencies are switching from the traditional approach of rewarding miners to an entirely different method.

For example in the beginning, when people used to mine Bitcoin, they were rewarded with Bitcoins for their efforts.

You can find more information regarding different kinds of rewards in this infographic below:

PoS vs PoW

Limited Supply Issue:

Mining Difficulty

Back in 2009, Bitcoins generated per block discovered used to be 50 and the total number of Bitcoins that exist is 21 Million.

Initially, it was Bitcoins were halved every 210,000 blocks which approximate to every four years. This mechanism was designed as a way to protect Bitcoin from being manipulated by the governments and banks and also to save it from inflation which would have occurred in case of an infinite supply of coins in circulation.

Satoshi Nakamoto (Creator of Bitcoin) in his white paper stated that the purpose of creating a limited number of coins was to make it a finite resource which will make its value “being largely attributed to their growing scarcity.” like other natural resources i.e. Gas, Oil, Gold & Diamonds.

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