Blockchain and Cryptocurrencies
Cryptocurrency has become a well-known term in the last few years, it seems to pop up everywhere when we scroll through our newsfeed or zap through programs on the TV. But what actually is it? Let me tell you, Bitcoin is not the only one out there! Cryptocurrencies are digital currencies; each unit is a digital coin that can be bought and sold on cryptocurrency exchanges. That makes it very attractive to traders and like all new things, some old school institutions might feel threatened by it. But cryptocurrencies are just a by-product of a much more exciting new technology: blockchains!
A blockchain is the backbone of all cryptocurrencies, some have their very own blockchain, other cryptocurrencies run on top of the blockchains of other projects. For instance: Bitcoin runs on its own blockchain; the Bitcoin blockchain. Ether, Shiba Inu and many others all run on the same blockchain, Ethereum. Cryptocurrencies are digital money, also called tokens. They can be used as payment for activities and services on the blockchain or traded into other currencies.
A blockchain is basically just a database, which stores its data in linked together chunks, called blocks. This makes it a very well organized database, with each set of data having a timestamp and unmovable link to the data that is previously entered and all future data added to the blockchain. Data that is stored on the blockchain can never be changed.
What makes blockchains different and more secure from other databases is the fact that it is decentralized, meaning it is not depending on a single server and location but on several. The components that enable this are called “nodes”. Nodes are computers with a full copy of the entire blockchain transaction history stored on them. Each node that participates on a blockchain is connected to all other nodes. They are in constant exchange with each other, always updating each other and recording and checking (verifying) all ongoing transactions on the blockchain. This principle is called decentralization and it is what makes a blockchain a lot less vulnerable to any safety concerns. Each node decides if a new block is added to its copy of the blockchain or not. If many nodes say ”A” should be added, and one node says “B” should be added, the nodes choose the many of course!. This way, if one node is corrupted (think about power outages or a hacker attack), all other nodes will deny new blocks coming from the corrupted source and only trust the many neighbours who are correct.
A blockchain is an unchangeable database that stores data in chunks called blocks.
Nodes are the components that verify, add or deny blocks.
Cryptocurrencies are digital money that can be used to pay for blockchain services