Welcome to my first article of Blockchain World Series. Let’s get started!
The word Bitcoin became popular before the word Blockchain got it’s place. And this made most of the people to think Bitcoin is the Blockchain instead of Bitcoin is a Blockchain.
Bitcoin is implemented over the Blockchain framework and most of the cryptocurrencies that we know today we’re created over the Blockchain framework. Since cryptocurrencies became the first application of Blockchain, it doesn’t mean Blockchain is only meant for cryptocurrencies. It’s applications are more than we think.
Before we think of those applications, let’s first understand Blockchain.
So what is actually a Blockchain?
It’s a chain of blocks where each block contains some transactional data and information about previous block in the chain.
Yeah I know that was just a layman’s definition.
Okay, to understand Blockchain better, let’s talk about the Blockchain framework. And the Blockchain framework consists of several components such as,
we will go through all of them in a series of articles individually and that’s because, Blockchain framework cannot be explained in a single article unless it’s at least for a 30 minute read.
Who is here to read a 30 minute article? Right.
So let’s break this into pieces and move on step by step. And by the end of this series, you will know the in and out of Blockchain. For this first series, let’s talk about some history along with an introduction to peer to peer networking.
History of Blockchain
Blockchain was first implemented in Bitcoin, a cryptocurrency proposed by Satoshi Nakamoto. He is the one who developed Bitcoin using blockchain.
1 bitcoin equals to 100 million satoshis making it the smallest unit of bitcoin.
He introduced bitcoin as an alternative to the existing centralized banking system since bitcoin is decentralized.
What’s wrong with the traditional centralized banking system?
As the name suggests, centralized refers to the authority of control being given to a single entity. And decentralized is just the opposite of centralized where the authority of control is not given to a single entity, instead it’s being distributed over a network.
In a centralized banking system, say you want to send some money to your friend. And as you know, this transaction goes through a payment gateway first, then to the bank and then finally to your friend. So the problem here is,
- Everything you do is recorded by your bank and will always be an intermediator between you and your friend.
- There will always be some transactional charge for your transactions.
- Since all of your information is kept centralized within a bank, there’s a risk of data being deleted accidentally or stolen.
And that’s what Bitcoin tried to replace using blockchain.
- Bitcoin is decentralized which means there’s no central authority like a bank.
- Bitcoin is distributed over a peer to peer network.
- And there’s no risk of data being stolen or deleted as it’s all distributed over a network.
What’s a peer to peer network?
A typical example of a peer to peer network is Torrent. And we all have used it at least once in our life.
So how does Torrent work?
Torrent works by gathering pieces of data from all the nodes/peers(computers using Torrent) in a Torrent network and serving other nodes requesting those data over the internet. And that’s why the download speed gets fluctuated frequently in Torrent since the number of nodes serving you those pieces of data may decrease or increase.
More the number of nodes, more is your speed. Less the number of nodes, less is your speed.
Assume that you are downloading a movie using Torrent. The movie you are downloading does not get downloaded from a single source, instead bits of movie data is gathered from other nodes(computers) using Torrent. And those nodes will have that movie already downloaded with them.
The node which serves data to other node is called a seed and this process is called seeding. You can see your torrent client seeding after your download is over. This is because you are now serving that downloaded data to other nodes.
And that’s how files get downloaded in Torrent. I used this example since Torrent is also decentralized like Blockchain. Decentralization is mainly powered by the above said peer to peer networking mechanism.
Peer to Peer Network in Blockchain
Blockchain also works the same way as torrent does by using peer to peer networking. Since bitcoin was developed over blockchain, bitcoin also uses the same peer to peer network. And that’s why it is decentralized. There is no central banking system. Instead, bitcoin transactions are recorded to each node in the blockchain network similar to a torrent network. So it’s kind of distributed over a network. And each node in the network has it’s own copy of transactions done in the entire network. Also every node in the network gets updated whenever there occurs a new transaction.
Can each node in the network see my transaction details?
Though some data like sender and recipient of a transaction is visible to all the nodes in a blockchain, sensitive information in a transaction is encrypted using a public and private key which we will discuss about in a later article. So only the owner of a transaction can decrypt the information with his private key.
Transactions in the blockchain network cannot be changed once it’s done. Even the owner of a transaction cannot change the data once it’s recorded by the network. Blockchain is immutable.
Hence Bitcoin is a Blockchain and not the Blockchain as blockchain has now made it’s way up to many other applications other than cryptocurrencies.