What is Block Chain Technology?
Bitcoin and other Cryptocurrencies operate on a decentralized network that is managed through complex math.
But how does it work? Let’s break it down to basics.
Does anyone remember checkbooks? Perhaps you remember the first few pages looked like an excel spreadsheet? This section was used as a ledger to keep track of your finances before online banking existed. The blockchain, used in cryptocurrency, works similarly without one major component — the bank isn’t invited. The blockchain has no owner, is managed by all of us, and although it may seem overwhelming to think about, simply remember this — the internet was a wild concept not too long ago, too.
Every time a transaction occurs, a signal sends to everyone in the blockchain; if you have purchased the required tokens to gain entry. That transaction goes into your “checkbook,” or ledger. The ledger records everyone’s transactions on the blockchain, not just yours, though. The goal for everyone is to have identical ledger entries. Instead of sending out a signal for every transaction, however, they are sent out as Blocks — a list of transactions that have occurred since your last block.
The most attractive feature of blockchain technology is transparency within the system. When you give your money to a large bank, there is no transparency as to what happens with that money or whether they have enough money to give you yours back. With blockchain, every transaction is recorded and is viewable by everyone else. How do these link together? That happens through a complex math algorithm called SHA-256 that we are going to simplify right now.
Every block has a large code at the top and bottom of each block. These are to verify that it is the official one. The code at the bottom of each block should be the same code at the top of the following block in the chain. This method makes it easy to follow which block follows each other in the chain. The code at the bottom is a great big mystery — A challenging math problem with an answer 256 characters long. That is where miners, like bitcoin miners, come into the equation.
These miners have their systems working tirelessly to solve this problem at the bottom of the block. Once solved, the miner receives financial compensation in the form of tokens. That is where crypto mining becomes such a lucrative endeavor.
Recently, Crypto experts took to capital hill and broke down the market for law makers. Check out this video of Brian Brooks, CEO of Bitfury Group, explaining the block chain to Congress.
Crypto expert, Brian Brooks, CEO of Bitfury Group, explains the Blockchain to Congress
SHA-256 is one of the most popular hash algorithms around and used in most crypto currencies.
Once the code’s cracked, the miner sends it out to every other member of the blockchain to add to their chain. The process then starts over and miners will work on the following problem. To this day, anyone can look back at block one of any chain and follow each one and see complete transparency with every transaction. Corruption’s thrown to the wayside with a system that becomes nearly impossible to trick. Even if someone creates a phony block, they will be racing against every other miner in the world to crack the one after that. Statistically, they couldn’t possibly crack every block, and once the block codes don’t match, it will be evident to everyone where the break in the chain was and who sent out that phony block.
Blockchain technology is primarily used in the cryptocurrency space; however, there is a rising movement on how serial entrepreneurs are looking to move blockchain technology into other fields, hoping to curb corruption and create transparency in other fields.
Our COO, Dan Kirk, here at Geobitmine, recently spoke on the many aspects of Blockchain technology at Sir Anthony Ritossa’s 17th Annual Investor summit, in Dubai. Check that video out here.