BLOCKCHAIN 101

BLOCKCHAIN

What Is Blockchain?


Blockchain is a type of database, which is used to store transaction records. It is comprised of blocks in which those records are stored. All blocks are connected with each other from the beginning to the end. The connection between every two blocks is achieved by 
block hash.

blockchainnetworkstructureDifferent from the traditional database which is normally controlled by a single party or organization such as Facebook, Twitter etc., Blockchain is decentralised which means there is no single person can alter or tamper with all the records. It is managed by all nodes within the blockchain network.

What is the Node in Blockchain?

Each node refers to a computer or machine that connects to the blockchain network. Those nodes that download every block and transaction information and verify them against the core consensus rules are called Full Nodes.

You can simply regard blockchain as a decentralised ledger that managed by many people (represented as nodes in the network). All of the transactions will be recorded in the block and broadcasted to all nodes.

How Does The Blockchain Work?

Bitcoin is the most popular implementation of the blockchain technology. When we are talking about blockchain, we mainly talk about Bitcoin Blockchain. Here we use Bitcoin Blockchain as an example to demonstrate how does blockchain technology work.

The first block on blockchain is called Genesis Block. For any blocks on the chain, there is only one path to the genesis block. Blocks are generated by bitcoin miners while they are doing Bitcoin mining. The maximum size of each block is 1MB.

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Whenever the transaction happens, the transaction information will be recorded in the block and validated by the miners. Blockchain is an append-only ledger which also requires decentralised consensus, which means no single party or individual can be able to alter or tamper with the record on the chain.

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BITCOIN

What Is Bitcoin?

Bitcoin is a form of digital currency, created in 2009 by an unknown person using the alias Satoshi Nakamoto and held electronically. No one controls it. Bitcoins aren’t printed, like dollars or euros – they’re produced by people, and increasingly businesses, running computers all around the world, using software that solves mathematical problems.

 

How Does Bitcoin Transaction Work?

Transactions are made with no middlemen – meaning, no banks! There are no transaction fees and no need to give your real name. Bitcoin transactions are sent from and to electronic bitcoin wallets, and are digitally signed for security. Everyone on the network knows about a transaction, and the history of a transaction can be traced back to the point where the bitcoins were produced.

For a quick digestion of the information relates to Bitcoin, you can check the 62 Insane Facts about Bitcoin. 

BLOCKCHAIN MINING

What Is Bitcoin Mining

Where do bitcoins come from? With paper money, a government decides when to print and distribute money. Bitcoin doesn’t have a central government.

With Bitcoin, we need to “mine” it. “Miners” use special software to solve math problems and are issued a certain number of bitcoins in exchange. This provides a smart way to issue the currency and also creates an incentive for more people to mine.

 

Who Is The Bitcoin Miner?

A Bitcoin miner is a computer specifically designed to solve problems according to the proof of work algorithm.

Currently, highly specialised chips called ASICs, Application Specific Integrated Circuits, are used as Bitcoin miners.

 

What Does The Miner Do?

The role of miners is to secure the network and to process every Bitcoin transaction. Miners achieve this by solving a computational problem which allows them to chain together blocks of transactions (hence Bitcoin’s famous “blockchain”).

 

Why Do People Want To Be A Bitcoin Miner?

That brings us, at last, to the question of why miners mine. This answer is actually simple, miners mine because the writer of a new block in the blockchain has permission from the protocol to give herself a reward of brand new bitcoins, called a coinbase transaction. That reward started at 50 bitcoins per block. Every four years the protocol is adjusted, reducing the reward by half. One day the reward will be very small, but miners can also be rewarded by collecting fees volunteered by users that request transactions.

 

How To Become A Miner?

To begin mining bitcoins, you’ll need to acquire bitcoin mining hardware. In the early days of bitcoin, it was possible to mine with your computer CPU or high speed video processor card. Today that’s no longer possible. Custom Bitcoin ASIC chips offer performance up to 100x the capability of older systems have come to dominate the Bitcoin mining industry.

Bitcoin mining with anything less will consume more in electricity than you are likely to earn. It’s essential to mine bitcoins with the best bitcoin mining hardware built specifically for that purpose. Several companies such as Avalon offer excellent systems built specifically for bitcoin mining.

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