My two cents on Blockchain and Cryptocurrency

Photo by Joshua Hoehne on Unsplash
  • We need to agree on the terms of the transaction.
  • Once the transaction is complete it's final.
  • By mistake, I record $10 or $1000 in my ledger
  • The other party is not trustworthy and he mentioned he never received it
  • The ledger where you are maintaining transaction is lost
  • It’s a constantly growing ledger or in simple terms, it's a file that maintains all the records. The current size of Blockchain is 346.2GB.
Reference: https://www.blockchain.com/charts/blocks-size
  • It keeps the record of every single transaction that ever happened
First bitcoin transaction(Reference: https://explorer.btc.com/btc/block/1)

What is Bitcoin?

Photo by André François McKenzie on Unsplash

Bitcoin limits to 21million coins

How bitcoin works

  • Bitcoin consist of a network of nodes. Any system connected to the internet and running bitcoin software can be a node.
  • Any transaction that happens on the public blockchain can be viewed by anyone.
  • The bitcoin blockchain will be built by a group of people called miners. Miner's work is to process and confirms the transaction. Miners solve the cryptography challenge and paid in bitcoin.

Different Components of Bitcoin

  • Bitcoin software: Bitcoin runs on software and its open-source software and that software is built to run everything that bitcoin does.
  • In that software, there is a cryptography challenge approximately every 10 min to build a new block.
  • The entire miner community with their computer ready starts working on that challenge.
  • A miner solves the cryptography challenge, he is awarded 6.5 bitcoin(currently, bitcoin award cut into halves every 4 years). If the miner is solving the cryptographic challenge quickly then the bitcoin network adjusts its complexity and starting giving complex changes but if the miner slow to solve the challenge bitcoin software starts providing a lesser complex challenge.
  • The rest of the miner community verifies the validity of the new block mined.
  • The new block of the transaction is added to the bitcoin blockchain.

Some key terms

Introduction to Cryptocurrency

Different type of Cryptocurrency

Initial Coin Offering(ICO)

Blockchain Use Cases

  • Non-fungible Tokens(NFTs): It’s one of the hottest blockchain applications. 2021 see the rise of digital items like art, music, videos, and GIFs that are sold on blockchain. Some of the famous examples are:
  1. Beeple sold an NFT for $69 million

Limitation of Blockchain Technology

  • Scalability: Scalability is one of the major concerns for blockchain. Anyone who used the Bitcoin network aware of the network congestion problem. As more people joining the network it's even getting slower. If you compare Bitcoin with its counterpart VISA which can process 1700 transactions per second whereas Bitcoin can only do 4.6 transactions per second.
  • Immutable: Data immutability is another major concern where the data are once written it can’t be removed. It’s useful in cases like financial systems or supply chains but if your case involves data modification then blockchain is not for you.
  • High Energy Consumption: To update the ledger with the new transaction miner need to solve a complex mathematical problem that involves high electricity consumption(This is discussed in depth under Future of BlockChain and CryptoCurrency).
  • Security Flaw Still Persists: Blockchain technology is secure as compare to other platforms but there are ways it can be compromised. One of the prime examples is a 51% attack where an entity can control 51% of the network nodes which can result in control of the network. By doing that attacker can modify the data in the ledger.
  • Managing your own Private Keys: In order to access your assets, users need private keys. This is generated during the wallet creation time if it lost there is no way to recover it and you will lose your wallet forever.

Common Misconception

  • Blockchain is Bitcoin: This is one of the common myths that Blockchain is Bitcoin. One of the reasons for this myth is both of the technologies become famous at the same time. In reality, Bitcoin is one of the applications of Blockchain.
  • All Blockchain is Public: Not all Blockchains are public. Other ones are private and federated. In the case of Private Blockchain, permission is restrictive and they operate in a closed network. For e.g. JPM coin discussed above.
  • Blockchain is a Database: Blockchain is definitely not a database. Database stored information in a centralized place in the form of tables whereas Blockchain stored records and transactions in the form of blocks visible to everyone. Another major difference is in databases you can modify data whereas Blockchain is immutable.
  • Targetted only for Finance Sector: Another misconception is it's only targetted for the Finance sector but as you see in the Blockchain use cases above other industries like healthcare, supply chain, manufacturing starts adopting it.

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AWS Community Builder, Ex-Redhat, Author, Blogger, YouTuber, RHCA, RHCDS, RHCE, Docker Certified,4XAWS, CCNA, MCP, Certified Jenkins, Terraform Certified, 1XGCP

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Prashant Lakhera

Prashant Lakhera

AWS Community Builder, Ex-Redhat, Author, Blogger, YouTuber, RHCA, RHCDS, RHCE, Docker Certified,4XAWS, CCNA, MCP, Certified Jenkins, Terraform Certified, 1XGCP

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