In the last five years, the term “Bitcoin” got popular and trendy in the world. However, a few people have knowledge about the digital currency and Blockchain. The search engines got sick of the repeated questions about Bitcoin. People search and ask, what is Bitcoin? What is Blockchain? Is Blockchain same to Bitcoin? How does Bitcoin work? Many questions come to mind, but you do not need to worry anymore. Let’s dive into it to figure out all these issues.
What is Bitcoin?
The first cryptocurrency in history which uses a financial decentralized system that can be sent from a user to another within the Bitcoin network which depends on the Blockchain system and it keeps track of the transactions.
From another side, it is a digital currency that depends on a peer-to-peer economic system, and we can indicate to Bitcoin by the abbreviation BTC.
Bitcoin is not controlled by one body but it is supported by many computers “nodes” that are distributed around the world. Bitcoin network depends on the distributed ledger which is called blockchain, that is responsible to maintain an organized list of all of the transactions, these transactions are collected in a chain of blocks, where the name of Blockchain came from.
What is Blockchain?
It is a chain of records that looks like the general ledger or database, but what makes it special is its mechanism to verify the authenticity and protection of these records.
In the early 1990s, the first version of Blockchain was built by Stuart Haber and Scott Stornetta, they applied cryptographic proofs to secure a chain of blocks as a method to prevent data manipulation which led to the creation of Bitcoin.
However, Blocks are made up of digital pieces of information. To be specific, they have three parts:
- In the blockchain, blocks store different information about transactions like the date, time, and amount of your most recent purchase.
- They also store information about who participates in the transaction. Once you make a purchase on a platform such as Amazon, it will recover your name, but not the actual one, it is kind of like a username.
- Blockchain uses Hash which is a unique code that each block stores to distinguish information from a block to another.
So when someone sends a transaction, it is transmitted instantly to the network to be verified by the miners that are working constantly to confirm individual transactions and insert them in the next block of transactions in the chain. Once a new block is verified, all the transactions within it are permanently recorded on the Blockchain.
Each one participates in the mining process has an identical up-to-date copy of the public ledger, which contains a record of all the transactions in Bitcoin history and this ledger is updated every time a new block is found.
You may wonder about the security of Blockchain but you do not need to worry about it since it uses a decentralized system.
Blockchain has a light level of security and cannot be hacked since it uses decentralized consensus to maintain the network so the larger the network grows and becomes increasingly decentralized, the more secure it becomes.
The use of Blockchain is to record and distribute digital information but not edit it.
Authorizing and verifying the printed currency can be done by a bank or government but that does not work with Bitcoin which is controlled by anyone, so the transactions are verified by a network of computers.
When you use Bitcoin to pay someone for goods, computers on the Bitcoin network verify the transaction through running a program on the computers of Bitcoin users to solve what is called a hash, then its algorithmic work will verify the transaction in the block.
The coming of what is called Blockchain in the technology world and using it in the cryptocurrency world represented a revolution in the modern era.
How does blockchain work?
In the real world, you need a trusted body to transform money to another one, in other words, you need a bank to make any transaction. However, there is no place of a trusted body to make any transaction using Blockchain. When you request a transaction, a block that represents the transaction is created, then the block sends information about the transaction to every node in the network which verifies the transaction, then the nodes receive a reward for the proof of work and the block is added to the existing blockchain and here the transaction is complete.
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