There are tonnes of literature available on blockchain and bitcoins. But in simple words, what is blockchain? How is it started? How does it work?
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There are tonnes of literature available on blockchain and bitcoins. But in simple words, what is blockchain? How is it started? How does it work?
The blockchain technology is a stepping stone for the start of a new era of internet-based technological development. It is leading the world from a centralised system towards a distributed and decentralised system.
A blockchain is a cryptographically based distributed database. In 2008, “Bitcoin: a peer-to-peer electronic cash system” published by Nakamoto brought blockchain into the public eye. The blockchain turns transactional data into blocks within a certain period of time and then connects these blocks to form a chain structure.
The blockchain is a technology that records transactions in a permanent way which cannot be erased afterwards, though can only be sequentially updated. In other words, it keeps never-ending historical records. This can revolutionise the ways we currently create transactions, storing data, and moving assets. These are the least it can do.
Based on the P2P network and cryptography the blockchain will construct a set of decentralised distributed ledgers. Nodes in the blockchain can copy, download, and maintain data records on the chain which is a key to build trust. The blockchain is divided into three types: open/public chain, consortium chain and private chain. The blockchain consists of six parts: the data layer, network layer, consensus layer, incentive layer, contract layer and application layer.
If we paraphrase Nakamoto’s paper, we can get the following key points: