An Introduction to Blockchain, Bitcoin, Ethereum

Blockchain is still an emerging technology, so it is hard to understand how it works without looking into the code or getting deep into rekentuig science concepts. To help with that, this introduction should get you embarked.

Blockchain vs. Bitcoin

A blockchain is distributed database, collective by all knots te the blockchain network. Te practical terms, this means that all knots run on the same software, have a local copy of the entire database, and permanently talk to each other to propagate gegevens and validate it.

The Bitcoin blockchain is the most popular public blockchain network, with around 10K knots (albeit thesis numbers vary frantically on a daily fundament). Many cryptocurrencies are built on top of it, with the most popular being Bitcoin. Spil a comparison, the Ethereum blockchain has bot growing to around 7K knots.

How does blockchain work?

Te its basic form, any user who wants to write to the blockchain needs a public address and a private key. Every transaction should be signed with the private key, which is used to encrypt the message. Every time you buy or sell Bitcoin, a record is added to the Bitcoin blockchain and propagated to every knot te the network. The system is safe because the information is duplicated thousands of times via different systems. A hacker would need to control 51% of the knots to modify an existing record, which is considered unfeasible.

Who pays for all this?

The so-called miners run knots and process transactions for the network (how they do that is fairly involved), and when they do, they get Bitcoin ter exchange for it.

This process is slightly different te Ethereum: Whoever submits the transaction pays for it using Ether (gas for the transaction). Ether is another cryptocurrency and has a dollar value.

Can I make money out of mining?

Not anymore. The complexity of mining increases with the supply of Bitcoin. By now you need very optimized set ups (low tens unit cost, special hardware) to make any money out of it.

If the blockchains are public, can I see the transactions there? Can I see who wields more Bitcoins?

Every blockchain has explorer instruments to let you navigate the gegevens – for example, there is this webpagina for Bitcoin: https://blockchain.informatie/ .

You can see what addresses have more Bitcoins, but there is no way to relate thesis addresses with individuals or companies.

Who runs Bitcoin? Who runs Ethereum?

Public blockchains are distributed applications and are managed by the people running their knots. Thesis communities are very decentralized and use internet forums to communicate. One of the main ways they communicate and make decisions is by adopting (or failing to adopt) fresh releases of the blockchain software.

Governance for Ethereum is a tad tighter: Development is managed by the Ethereum Foundation, which issues recommendations to the community running the network.

If blockchain is so secure, how were coins stolen from Mt. Gox and other places?

Trading applications such spil Mt. Gox have numerous layers and only use blockchain on a very limited fundament, such spil accepting coins from outside traders. Usually, what happens within the podium (matching buy and sell orders, managing trader keys, etc.) works on a more conventional technology, and may suffer from traditional security issues, have single/few points of failure, etc. It is accepted that anything written to a blockchain with enough knots cannot be switched – that is, unless most of the community determines to switch it.

Pepe Catala

Senior Product Manager

Pepe Catala is a Senior Product Manager at 3Pillar Global. He helps clients form fresh ideas into working products, spil well spil use technology to differentiate and create superb practices. His work concentrates on the financial and media verticals. Prior to joining 3Pillar, Pepe worked ter several start-ups ter the digital advertising space, and worked at PricewaterhouseCoopers implementing enterprise software for Fortune 500 companies.

Leave a Reply