Understanding the Blockchain: The Foundation of Cryptocurrency

Which side do you support then? Buffett's or Musk's?

I turned to look at my friends, who were anxiously awaiting word from their engineer friend. I finally had a chance to speak after listening for an entire hour to their opinions on cryptocurrencies and how they believe it will change the world. My lack of experience and interest in cryptocurrencies was likely the cause of my passive involvement in the conversation. My pals continued to lecture me for another two hours until I made the decision to learn more about this obnoxious technology.

I made the decision to completely immerse myself in the field of cryptocurrencies from an engineering perspective. One thing I learned after spending hours online was that "Blockchain is the workhorse of everything; It is vital to grasp it to master crypto!" Without giving it a second thought, I began to learn blockchain, and I quickly realised that mastering it was a crucial first step towards understanding any form of cryptocurrency. I shall make an effort to summarise and organise my learning through this article.

First things first - What is Blockchain?

Let us first look at the definition of the Blockchain which is given something as -

Helpful? No? Let us break down the definition to understand it.

Therefore, the foundation of blockchain is a database—and not just any database, but a distributed database. What is a distributed database, you might wonder? There is no single source of truth in a distributed database. The data is stored on numerous devices that are dispersed geographically. This makes the system fault resistant because a hijacking incident or machine damage won't bring the system to a halt. The system is not ruled by a single machine or human, and neither can they determine what data will be retained. The system adds to the database anything it decides and not any single machine.

The blockchain is public. Why does that matter? Every person in the world has the ability to join this network, and every person has the freedom to leave it whenever they choose. Due to the fact that blockchain is open to everyone, there are no restrictions on network users.

The blockchain has a timestamp. A timestamp is preserved on all events that are kept in the distributed database of Blockchain. This aids in preserving the sequence of events occurred on the Blockchain.

The most crucial aspect of blockchain security is cryptography. The concept of blockchain relies heavily on the use of cryptographic techniques to prevent data manipulation. It guarantees that events that have been recorded cannot be deleted or have their sequence modified.

So, in a nutshell, a blockchain is a public distributed database that guarantees data security and ordering using crypto-graphical methods.

Okay… But why is it called Blockchain?

In the case of Blockchain, events occurring in the network are stored in a data-structure that is called Block. The entire Blockchain is a sequence of Blocks that are connected to each other just like a Linked List. Here is an illustration.

The links that connect the Blocks are created using cryptographic methods. Creating and destroying this links requires some level of computation from network members.

Linking Blockchain and Cryptocurrency

After learning the basics of blockchain, we can begin to comprehend why cryptocurrency requires blockchain.

You see, there are a number of requirements that must be met for any kind of currency to function in our society. These consist of, among many other things, the following:

• One should be able to utilise the new money to conduct financial transactions
• Currency should not be duplicated, meaning that money cannot be spent twice.

Cryptocurrencies are decentralised even if they are a kind of money. This indicates that there can't be a centralised government or bank to oversee and regulate how money is used on a daily basis. And when there is no central authority, it is harder and harder to ensure that a currency is functioning properly.

Using Blockchain for creating Crypto

Making a currency that is really decentralised is difficult in many ways. Blockchain, however, gives us a means of producing a decentralised currency. We can keep transactions in Blockchain as it essentially functions as a distributed database. We are actually able to operate a currency on Blockchain thanks to its security and other assurances. No transaction will be allowed to be deleted or changed. Because Blockchain is open to everyone, anybody may participate in it without worrying about being sanctioned.

What is actually kept in the Blocks of Blockchain?

The actual content of the Blocks in the Blockchain varies from crypto to crypto. We can take an example of very first cryptocurrency i.e., Bitcoin. Here is what a Block in Bitcoin looks like.

In the blockchain of Bitcoin, a block stores information like the hash of the previous block, a list of transactions, and a Nonce. All of the transactions that are included in a block are regarded as being finished once that block is added to the blockchain.

Note that a Block in Bitcoin’s Blockchain consists of two parts - Block Header and Block Body. While the header contains things that are important to validate the Blockchain, the Block Body contains the actual transactions.

We comprehended the fundamentals of blockchain and how cryptocurrencies utilise it. If you want to become an expert in cryptocurrencies, it is crucial to understand Blockchain. The following stage is to comprehend how some of the most significant cryptocurrencies utilise this Blockchain. For instance, we briefly mentioned how Bitcoin transactions are stored on the Blockchain.

A thorough essay on how Bitcoin makes use of this Blockchain will be published soon. Keep a look out for the next one if you enjoyed this one to discover more about the incredible technology that is changing the world around us.

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Happy Learning! 🙂