Blockchains & Bitcoins – A Primer

Hi Guys,

This is my first post in Steemit and hopefully many more to come! I will post another one to introduce myself but first something that I am passionate about. Blockchain. Hope you guys like it!

Blockchains are the foundational steps to the digital currency, bitcoin. It is a relatively new technology, with the first conceptualization coming just about a decade ago, in 2008 by Satoshi Nakamoto, an anonymous cryptographic programmer who developed bitcoin, and the blockchain database that the currency is based on. Confused yet? Don’t worry, we’ll break it down.

Think of blockchain technology as a set of lists, distributed ledgers, that are replicated over and over again on multiple computers, and are not stored on a central server. Essentially, a blockchain allows for secure online transactions, that are set up in a decentralized manner. A decentralized ledger just means that the transactions can be recorded over many, many computers, and nothing can be retroactively edited or modified, at least, not without altering every single block all the way back to the start of the network. This inherent design makes the network very secure, and because blockchain technology is decentralized, it alleviates the risk of having all the data stored in a central location, a la a central server.

Blockchain technology is over a peer to peer network, which uses cryptology and unique digital signatures to validate a user’s identity, authenticity, and to enforce read/write access. Blockchain technology is bit like puzzle pieces: a lot of different pieces of technology that fit together based on the user’s need. Blockchain takes the concept of a database one step further: there are additional rows, and Blockchain validates those new rows to make sure they conform to pre-determined rules and standards, and Blockchain broadcasts these new rows to the peer to peer networks, to ensure that everyone using that particular database has access to that same data. Blockchains are resistant to modification after a transaction has occurred: data in any of the blocks, or puzzle pieces cannot be changed or edited after the fact. This too helps with security. A Blockchain can be viewed as a ledger, that is open, verifiable, and permanent. It is able to record transactions between parties, and once they are completed, they cannot be verified. Because Blockchain technology is secure by its cryptographic design, and is decentralized and managed NOT by a centralized server or authority, its technology makes it an attractive potential platform for things like medical records, record keeping, and financial transactions. Financial transaction was introduced to the Blockchain technology via the bitcoin.

Now that we’ve established what Blockchain technology is, let’s talk about one the most famous things to come out of Blockchain: the bitcoin. The easiest way to think about Bitcoin is to think of this way: If the internet was a country of its own, the bitcoin would be its currency. Bitcoin is the very first completely digital currency, a crypto-currency. If you think about it, all currency, as digital as it may seem, is anything but. Currently you need a third party to process the financial transaction, things like PayPal, or your bank. Bitcoin operates completely independently of a third party, and allows individuals to render and be paid for services in a near immediate fashion. Bitcoin transactions take mere seconds to go from one user to another, and then take no longer than an hour to ‘settle’ and complete (similar to a payment clearing your bank, for example). How do you send bitcoins back and forth? The process is actually easier than you may anticipate.

Bitcoin transactions are done peer to peer, and are then recorded in the digital open ledger, or blockchain. In the beginning of this article, we discussed blockchains being like digital ledgers; and now we are talking about bitcoins, whose transactions are recorded in the digital ledger, the blockchain; coming full circle. Bitcoins are sent and received via the cryptographic wallet, which is a digital wallet where your two cryptographic keys are stored. As bitcoin uses public-key cryptography, the user holds two keys: one public, and one private. To send someone bitcoin, you must have their bitcoin address. To put it simply, a bitcoin address is something you create, unlike traditional banking. You pick a random number, any number, and the wallet app/technology will apply a mathematical equation to it to produce your unique key. Your private key is something that you never expose to anyone else; it is akin to a password, and it is something unique that you cannot change, so don’t forget it! Bitcoin wallets do not store actual bitcoins, rather they store the keys that allow you to send and receive your bitcoins. Because blockchain technology and bitcoins live and die by the public and private keys, keeping your cryptographic keys are of the utmost importance! Bitcoin transcends traditional currencies, and can be used with ease in a global marketplace.