BLOCKCHAIN – CRYPTOCURRENCY OR BITCOIN? [Basic concepts (Part 1)]

To answer in short, “Blockchain is not crypto currency!”, and I mean it! It sounds like, you are comparing Internet technology with Facebook. Internet is global system of computer networks that use the internet protocol suite (TCP/IP) to link devices worldwide, and Facebook is just an application running in internet. Same goes with Blockchain, it is nothing but the underlying technology where distributed ledger system is used to develop the technology so that it becomes trustless, simple and noncentralized. Well! You must be thinking, heavy words to explain a new technology. Rather its simple and easy one!

Before Starting with Blockchain, just want to give some overview on the decentralized network:

If we categorize the network systems we can divide them in 3 parts:

  1. Centralized network: Where there is a centralized node or server.
  2. Decentralized network: Where there is not a centralized network and instead of a single/central server or node there are multiple nodes.
  3. Distributed network: Where the decentralization is achieved by peer to peer connection, i.e. each node behaves as a centralized node and connected to the other nodes.

Please find below the Centralized, decentralized and distributed networks:

 

Same concept is applied in P2P or peer to peer network:

 

   Blockchain uses the same thing to achieve distributed ledger architecture.

Real life example:

  • Records of real time data, like sales and purchase of raw material.
  • Simple example would be our bank account statement.
  • A huge number of real time transactions.

[To simplify in lay man’s term: For the time being you can compare the data as a bank pass book where each page can be compared as a block and the blockchain is the bank’s passbook. And all of the block will be there as a chain, which is the blockchain as bank’s passbook. Moreover, they be in proper sequence as well, so if someone tries to tamper (or tear the page) with the block that will be visible to the others]

We can present a blockchain like the below diagram:

blockchain

Each block contains n number of transactions, and they hold the hash for previous block. To add a block in the sequence a unique Nonce number is very important (which can be calculated by trillions of combinations and practically impossible to tamper an existing block). The first block in a blockchain is known as Genesis block.

 

To be Cont….

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