What is a blockchain?
A blockchain is a distributed digital ledger that stores and maintains information that is shared amongst a global network of computers in a peer-to-peer structure, that cannot be altered without the consent of the majority of the network. That’s quite a mouthful! Simply put, a blockchain is a large, worldwide computer database that can be accessed by everybody, is owned by nobody, and can handle or store transaction data without the need of a trusted party.
First blockchain implementation
In 2008 a paper was published titled “Bitcoin: A Peer-to-Peer Electronic Cash System” by the anonymous Satoshi Nakamoto, the paper described using a peer-to-peer network to generate a system for electronic transactions without relying on trust. Satoshi essentially described a way for people to transact digital value over the internet, without the need for a trusted third party to validate the transaction.
Proof-of-work consensus
Satoshi found a way to prevent computers from creating endless copies of digital value, also known as the double-spending problem. He invented a consensus mechanism called proof-of-work that made it near impossible (or very costly) to fool the network.
How does a blockchain work?
Unlike traditional databases, blockchains are known for maintaining a secure and decentralized record of data. It guarantees and generates trust without the need of a third party. The difference lies in how the data is structured compared to a traditional database.
A traditional database usually structures its data into tables, whereas a blockchain structures its data into blocks that are “chained” together. When a block is filled with data and given a timestamp, it will create an irreversible timeline of data that is set in stone. Its goal is to allow information to be recorded and distributed, but not to be edited.
Blockchain transaction process
- A user submits a new transaction.
- The transaction is transmitted to a peer-to-peer global network of computers.
- The network of computers then solves an equation to confirm the validity of the transaction, known as the proof-of-work consensus. Also referred to as mining.
- When the transaction is confirmed as legitimate by the miner, they are filled into a single block of data.
- The blocks are then chained together in a linear timeline and will create a permanent history of all transaction data, known as the blockchain.
- The submitted transaction of the user is now completed without the need of a third party.
Blockchain core components
Blockchain will play an important role in the global economic landscape. The world runs on information. The faster, cheaper and more secure it’s receiving it, the better. With blockchain technology, virtually anything of value can be shared, tracked and recorded in an efficient way.
Trust
Enables trust between participants who don’t need to know each other. Eliminates the need for a central third party.
Secured
No one can change or tamper with blockchain transactions after it’s been recorded, making it immutable.
Privacy
Blockchain transactions allow users to control their own data through private and public key encryption.
Transparency and traceable
Blockchain maintains a complete history of past transactions, which means that the user can track the data with full transparency.
Speed and efficiency
Traditional databases are time-consuming and prone to human error. A blockchain structured ledger eliminates this with faster and more efficient automated settlements.
Cost
Creating a more efficient way of sharing information, less paper-heavy processes and eliminating the need to access multiple databases.
Blockchain terminology
At Boba, we believe that blockchain education is a fundamental part of starting your crypto journey. We understand how confusing some of these blockchain terms can be. That’s why we created a blockchain “cheat sheet” with all the essential blockchain definitions. We even added some “crypto slang” so you can join the crypto conversions.
