What is Blockchain?
Blockchain, formally known as Block Chain is a digitally distributed ledger that features a growing list of records referred to as locks.’ It is an ingenious invention of a person or group of persons suspected to be called Satoshi Nakamoto. Blockchain allows digital distribution of information that is readable by the public. However, it doesn’t allow for any form of modification whatsoever. Each block contains data and information that has bundled together and confirmed. Each individual block features a crypto hash of the prior block, data of transaction and a timestamp. An ‘open’ distributed ledger is the one that records and stores all transactions that occur in the network. They are then validated and permanently recorded in a distributed ledger. All the recorded transactions are added in chronological order thus allowing market participants to monitor their digital currency transactions. It means there is no need for central recordkeeping.
Since transactions are recorded and stored digitally, there is no need for rusted’ third parties like payment processors and more. The blockchain platform is managed by a peer-peer network that adheres to a procedure that allows efficient node-to-node communication and easy validation of new blocks. Once data has been recorded in a block, it cannot be changed without changing all the subsequent block which typically requires an accord of a majority of networks.
Blockchain was originally developed to be used as an accounting method for Bitcoin (a virtual form of currency). It was used to solve the problem of double spending without the need for a centralized authority or a trusted server. Blockchain technology is utilized in various forms of commercial applications like cryptocurrencies to verify transactions as it allows for digitization, coding and practical document editing in the blockchain. This creates an indelible recording that cannot be altered. Besides, the authenticity of every record has to be verified by the whole community using the blockchain rather than a single central authority. It allows an anonymous exchange of digital assets like Bitcoin while obviating the need for a central server that can verify and confirm trust and transfer of value.
How Does Blockchain Work?
As mentioned above, blockchain technology is a fundamental concept that is used in the cryptocurrency system like bitcoin among others. For one to make a transaction, they must submit it to the community. Transaction data contains public passwords that relate back to the private ones. Therefore, it means the transaction is secret and coded. When the data is public, all the members of the community can collect and confirm the data. They also attempt to solve a complex computational puzzle that allows the transaction to be added to the public ledger. The process is called mining.
Miners guess random numbers till they find the mystery number. The hash function makes it tough for them to predict the actual output. They then apply the hash function to the randomly selected number and actual data in the block. Each resulting hash must start with pre-specified zero numbers. Any two consecutive integers can give greatly varying results. Miners keep trying various numbers that may work.
The first miner that successfully solves the puzzle appends the block of transaction onto the blockchain. All new transactions added to the block become permanent. New coins are awarded to anyone that successfully creates and adds a new block to the chain. The process is called cryptocurrency mining.
How Does Blockchain Relate to Cryptocurrency?
The blockchain is a digital platform that forms a network and brings cryptocurrencies into play. It creates a channel through which transaction is executed and assets exchanged. Cryptocurrencies refer to tokens used within the networks created by blockchain. They act as tools, utility functions or resources on blockchain network. It means without blockchain itself, cryptocurrencies would not exist because there is no way of transacting them. Blockchain provides a verifiable platform that ensures all cryptocurrency transfers are actual transfers thus protecting against fraud and double spending among parties.
The relationship between blockchain and cryptocurrencies is of great importance. The distributed computers that record and verify transactions in a blockchain must consent that a transaction is valid before allowing for the addition of a new block to the chain. This improves protection as no single computer can change the history of the chain. It entirely replaces the need for a central authority to keep accurate records of all transactions.
Blockchain has its own robustness. In fact, it can neither be controlled by a single entity nor experience a single failure point. This is why since its invention, it has never experienced any significant disruption. Additionally, cases of human or machine errors are a thing of the past in the blockchain.
Popular Cryptocurrencies to Invest in.
Initially, cryptocurrencies were taken as niche products for tech experts and enthusiasts. However, it is now all the rage and the market is filled with various types of cryptocurrencies. Below are the 5 popular cryptocurrencies to invest in.
Bitcoin is the largest and highly valued cryptocurrency in the world. It was created in 2009. The price of Bitcoin has risen sharply over the recent past. In fact, in 2017 the price rose from $1000 to about $19000 which is equivalent to 1400% rise. The price of Bitcoin depends on the size of the mining network. This is because the as the network becomes large, the more difficult it gets for one to produce bitcoins. Currently, Bitcoin has a market cap of $3,411,544,421. The current BTC/USD is around $6,399.76. Bitcoin has become a great alternative to fiat money and other commodities such as gold. For one to earn bitcoins, they can buy them from a Bitcoin exchange platform. Other ways to explore include receiving them as payment or through gambling. Although Bitcoin has become too much pricey, there are high chances of making massive gains.
Ethereum is another cryptocurrency that has several applications. The blockchain platform behind Ethereum allows users to bypass several middle-men since the entire contract is hard-coded. It is not only a method of sending money but a platform for doing business. Ethereum has traversed the $1000 mark and is currently trading at $1050.01. It has a market cap of $53,186,213. It is one of the safest picks to invest in.
Ripple allows everyone to participate in the global ecosystem by balancing input currencies whether in fiat or cryptocurrency form. It currently has a market cap of $212,337,662. Lately, it overtook Ethereum thus becoming one of the largest cryptocurrencies in the world. It is currently trading at $0.445205. Ripple seeks to allow banks to make international transfers at a reduced cost.
Stellar has a quite unique underlying technology from that of Ripple but the premise and applications are similar. It has grown exponentially over the recent past and has a market capitalization of 13 billion USD. One lumen is currently trading at $0.75 and is among the cheapest cryptocurrencies to invest in.
This cryptocurrency is purely decentralized and has been proven to work as a medium of payment. It has a market cap of $122,021,894. Litecoin was introduced by Charles Lee, a Google Engineer. He created Litecoin with an aim of solving the problem that Bitcoin users face when mining bitcoins. It is a plain and simple cryptocurrency, unlike Stellar and Ethereum. It promises faster transactions, easier mining experience, and a higher coin limit. It trades at $299.95.
Through blockchain, cryptocurrencies are gradually becoming the future of payment. Its ability to guarantee the validity of transactions and robust security against fraud has made it so popular. It is incorruptible and transparent and doesn’t allow any malicious manipulation.