Fundamentals of Bitcoin and Blockchain
The co-founder of Encrybit (an upcoming Cryptocurrency Exchange) Jitendra Rajput says, “Blockchain has brought back the faith which was lost due to tainted authorities. Eagerly looking forward to the complete exploration of blockchain’s potential.”
Technical enthusiasts have gulped down each and every aspect of these terms and have started implementing in their business. It has been trending high on all media platforms and you cannot lag behind.
Brush up your skills and fill your brain with some basics of bitcoin and blockchain. Don’t be saddened by the technical enthusiasts around you. Start with understanding the fundamentals and then you can grasp the advance levels further.
Bitcoin is a well-known cryptocurrency and it works on blockchain technology. It is a digital virtual currency, you can neither touch nor feel it. Bitcoin and Blockchain were both introduced in the whitepaper entitled “Peer-to-Peer Electronic Cash System”.
The purpose inventing bitcoin was to eliminate the need for central authority from the transaction process. Because central authorities like the bank and financial institutions take a longer time to validate the transaction and also charge high transaction fees in case of international transfers. To speed up the transaction and reduce such high transaction fees, “Bitcoin” – a decentralized virtual currency was developed.
Its distributed nature is managed by the blockchain technology. The bitcoin transaction between two parties occurs faster within minutes as compared to 7-10 working days in the conventional banking system. Moreover, the transaction fee is as low as 0.1% to 1.5%.
Bitcoin can be bought from exchange platforms which accept fiat currencies in return of bitcoin. Do not forget to create your own bitcoin wallet before buying. Bitcoin wallets are used to hold the bitcoins you purchased as it provides a unique private key for identification. This private key is not be shared with anyone and has to be kept safe. If the private key is lost, you lose all your bitcoins. To receive bitcoins, you only need to share the public address of your wallet.
Hope you have mastered the fundamentals of bitcoin. Let’s move forward to blockchain…
Blockchain is the technology responsible for the existence of bitcoin and other cryptocurrencies. There are many other applications of blockchain other than these two. They are Land registry, Healthcare domain, Voting and polling, financial services, automotive industry and Government’s administrative processes. It’s just that these two are more popular.
Blockchain is also known as distributed/decentralized ledger which records all the bitcoin transactions occurred till date. It connects each node of the network to every other node of the network eliminating the need for a central authority. All the owners of these nodes will confirm the transaction to be validated.
Suppose you request a transaction as you want to send 20 bitcoins to your friend.
Your requested transaction is broadcasted to all the nodes connected to the network. All the nodes then verify the transaction based on previous balances using Secure Hash Algorithm. Once, the transaction is verified, it is added to the block. All the transactions occurring at the same time are added to the same block. Maximum block size of bitcoin blockchain is 1 MB. After this is filled up, transactions are added to the next block. This way a chain of blocks is formed and hence the name blockchain.
The transactions occurred using blockchain technology are permanent and unalterable.
Your identity remains anonymous up to certain extent. Although the blockchain ledger is public, it only shows the public address of your wallet. And it does not right away shows the bitcoin balance hold by a particular public address. It will only list the transactions occurred between two address. So, if you need to calculate bitcoin balance for a particular public address, you need to calculate manually using hashing technique. Thus, your identity and balance can be revealed only if someone knows your public address. There are methods available to hide your public address rather mask it in the blockchain ledger.
Still, the full potential of blockchain technology is yet to be discovered.
Hope I helped you understand the basics of bitcoin and blockchain.
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