What is blockchain?
No one really knows. That’s the honest truth. In its simplest form, blockchain is a way to record transactions and keep track of them in a secure manner. People can then use that technology to build new things with it, like new types of currency or even ticket sales! It’s up to the developers to decide what they want to build on top of blockchain technology.
How does it work?
In very simple terms, you have a public and private key pair (much like an email address). You give your public key out to everyone so they know who you are on the network. This key is essentially your identity on the network, similar to how your email address identifies you online today. I have a few novel uses of crypto and blockchain in mind, so I think it’s good to explain the basics first.
When you make a transaction on the blockchain network, you use your private key to sign that transaction. This is similar to digitally signing a file with an electronic signature on your computer. Once signed, other users can use your public key and verify that it was indeed you who made the transaction (not someone else). This verification is really important! Just like having an electronic signature allows you to prove ownership of some piece of information, so too does signing a blockchain transaction prove ownership over some asset. In this case, the asset being conveyed or transferred could be anything (such as money or real estate or stocks) and it can belong to anyone involved in that transaction (a person or company). The details will differ depending on what kind of blockchain technology we’re talking about. Again though – just like email addresses – everyone should have their own public and private keys so they are identified uniquely on the network!
What are blockchains? How do they work?
I’m glad you asked! Blockchains are simply databases which contain blocks of information connected together by cryptography. The users of the blockchain all share a copy of this database and we use cryptography to keep all that information secure. All transactions made on a blockchain are stored in blocks, and these blocks are connected together to form chains. When new data is added to the blockchain, it’s added as a new block which is then connected directly to the previous block via cryptography. This way, each node on the network can see how many transactions have occurred along with who owns what assets and how much they own! The idea behind this is that anyone can verify for themselves (and confirm) that no one has tampered with any transaction before it was confirmed. So if you want to sell your car for $20K in cryptocurrency tokens, then you will want everyone else on the blockchain network to verify that transaction and confirm it before they will accept those tokens as payment for your car!
How do I make money?
You don’t! Blockchain technology uses different methods of verifying transactions than other technologies do (such as credit cards). Blockchain doesn’t rely on centralized authorities like banks or Visa or Mastercard or PayPal – instead it relies on millions of computers around the world called nodes – who all run a program called “mining” (think gold mining… but less physical). These nodes have software installed which allows them to verify all pending transactions before they are confirmed by adding them as new blocks onto the chain. The node operators (the people in charge of running that software on those computers) are rewarded for confirming transactions by receiving tokens which can be used to power new blockchain-based applications. If you have a good idea for a blockchain application, then you will probably want to get some tokens as soon as possible so you can build your project!
What is cryptocurrency?
Cryptocurrency is simply another name for blockchain-based digital assets. In other words, cryptocurrency is digital money! It’s like dollars or euros or yen – except it exists only on the internet and it doesn’t have any physical form (just like email has no physical form). The best way I’ve heard it described is that cryptocurrencies are “digital cash”. You can use them to buy things online and pay people with them, just like using traditional fiat currency (like USD or EUR) today. The main difference between cryptocurrencies and fiat currencies though is that they are decentralized meaning they don’t rely on any central authority to run their network of nodes. Instead, anyone who wants to participate in the network of computers which verify transactions gets paid in cryptocurrency tokens when they contribute their processing power towards verifying new transactions which come into the system. This means everyone who runs a node on the network gets paid just by being there! These rewards are called “mining” rewards because people actually mine these coins/tokens out of thin air when they complete complex cryptographic challenges while confirming new blocks onto the chain.
To be honest, I’m not sure how much value there is in blockchain. It’s definitely a cool technology and it has been around for a while, but I don’t know if people will ever really use it or not. Whenever someone brings up bitcoin or any other cryptocurrency though, I get interested straight away! People are obsessed with money and that’s something we all share as human beings. It will be really interesting to see what happens over the next couple of years as these technologies mature. Blockchain seems like something which could potentially change the world forever – especially when combined with other emerging technologies such as artificial intelligence (AI) and augmented reality (AR). Maybe in the future we will even build entire cities in virtual reality? Who knows? This stuff is still pretty new… so who knows what might happen!?
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Thanks for reading!