Everyone who’s anything about blockchain might’ve heard about bitcoins, the most widely used application of blockchain. So maybe, understanding how bitcoins work may help you understand how blockchain works, but blockchain has a lot of other applications like supply chain management, secure sharing of data, etc.
Bitcoin(₿) is a cryptocurrency invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto. The currency began to use in 2009 when its implementation was released as open-source software. Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
Okay so that's the definition from Wikipedia, I'll break it down for you in simple layman terms.
Bitcoin is a digital and global money system currency. It allows people to send or receive money across the internet, even to someone they don’t know or don’t trust. Money can be exchanged without being linked to a real identity.
How Blockchain is different from the Traditional Banking System - The one that you all are familiar with(hopefully🤞).
This word is thrown around a lot in the crypto-currency world. All it means is that there is no central point of control(like Reserve Bank or govt. in India) in the Bitcoin network. The Bitcoin network is designed to be hosted and used by regular people. There is no Bitcoin company, there is no data centre.
Users have an address that holds their balance, much like an email address. Balances are public, but there is no way to relate an address to a person unless they decide to give their address away. Here is an example Bitcoin address:
I’m not going to confuse you with private key v/s public key gibberish in here. Bitcoin is the most secure network I’m aware of. Not a single Bitcoin in the last ten years has ever been fraudulently spent. There is nothing to hack. There is no central server that holds the balances, passwords, and usernames. In fact, every computer owns a copy of the balances, but each user holds their own keys that control those balances.
Here enters the hero of the show....
In super-simple terms, a blockchain is a computer file for storing data. Or, to put it in more technical jargon, it’s an open, distributed ledger, which means the data contained within the blockchain is distributed across many computers and is therefore decentralised.
Decentralised. Distributed. This sounds a bit like Bitcoin…
Well done Sherlock! Blockchain is the technology that underpins Bitcoin and it was developed specifically for Bitcoin. So, Bitcoin was the first example of blockchain in action and without blockchain, there would be no Bitcoin. That’s why the two names are so often used interchangeably.
But that doesn’t make them the same, there are so many other applications for blockchain out there...
Because blockchain and Bitcoin are so inextricably linked, it took people a long time to realise that blockchain actually has much wider applications beyond cryptocurrency networks. In fact, blockchain’s potential is so great that many people (myself included) believe the technology will revolutionise the way we do business, just like the internet did before it.
Here are just a few examples of the wider applications of blockchain beyond Bitcoin and other cryptocurrencies:
- Executing smart contracts.
- Maintaining a shared, transparent system of record.
- Auditing the supply chain.
- Providing proof of insurance. I might be proving my points in a very technical way throwing all these jargons at you. So if you need a bit more clarity, Do your own research (Blockchain Applications)[https://blockgeeks.com/guides/blockchain-applications/]
Totally understandable, if a picture is worth a thousand words, then a 60fps 6-minute video with 21600 frames can say 21,600,000(roughly 21 million words, way more than what I wrote for sure)...
I’m really sorry, I had to do that.😂😂😂🙏
Check this video out for more clarity.
P.S. This is my first post on Dev.to, So I actually used one of my medium posts here. Please do give your feedback. Thanks a lot.