I'm sure you've seen news headlines that blockchain technology is considered by many to be a revolutionary innovation, the recent launch of Bitcoin and Ethereum ETFs confirms that blockchain is the future. About 90% of US and European banks have begun to research blockchain's potential. Even though blockchain receives extensive mainstream news hype seemingly every single day, most people still aren’t completely sure what blockchains are, and how it works. Let me take this opportunity to explain blockchain in simple terms.
Blockchain is made up of two terms; a “block”, and a “chain”. A “block” is a place where we store data and various types of information in order to keep it safe, structured, and easily accessible.
👉Each block has information about the block previous to it, and this forms the a “chain” of connection between each block just like how a physical chain is used to connect items.
👉The information stored on a these blocks are called “transactional records”. So, all records of actions on the blockchain such buy and sell, staking etc are captured as a transactions.
👉For example if user A pays user B for $50 worth of Bitcoin, that activity on the blockchain is record as a transaction. Similarly, if User B pays user C for $100 worth of BTC and User C pays User A $180 worth of BTC. These transactions are stored chronologically on the blockchain.
Blockchains store data using two major methods are called “Proof-of-Work” and “Proof-of-Stake”
👉Once transactions are agreed upon between users, they need to be approved, before they are saved to a block in the chain. This transaction approval is done by "Miners". Miners use a computer, or a group of computers called nodes, that work to solve complex mathematical queries to confirm transactions and save records in a blockchain.
Blockchains are decentralized because they do not belong to a single authority. It is miners that have the responsibility managing and maintaining how blockchains functions.
👉Anyone can be a miner on the blockchain! In many cases, all that you need to do is connect your computer to the network, and dedicate its resources to the process of mining. This way, many people from all over the world can become miners, help manage the blockchain and confirm the transactions happening within.
👉These miners will be rewarded with the cryptocurrency of the blockchain they mine. For example, if you were to mine Bitcoin, you would receive BTC rewards!
👉All transactions happening on the blockchain are encrypted. This means that, say, when User B pays user C for $100 worth of $BTC , this payment is captured as an anonymous transaction on the blockchain, and is displayed in a sequence of numbers and letters.
Finally, due to the encryption and security features behind blockchains, all past-confirmed transactions cannot be changed.
