An introduction to Cryptocurrencies and Blockchain
Everybody has heard of it, Cryptocurrencies and Blockchain. But what is it exactly? There is a lot to learn about this subject. The article I wrote gives a little more explanation about this topic, to give a general idea of what it is, what it does, and what it means for you.
There is a hype, and most certainly an interest in cryptocurrencies at the moment. We see companies and people around us working with it, or wondering how they can employ it and make it a part of their business and their lives.
However, there is also a lot of people that don’t know exactly what cryptocurrencies are, aside that they are being used by a great amount of people, to trade with it or to obtain profit. But cryptocurrencies go further than that: each currency has its own purpose, which makes each of them valuable for different reasons.
So, why is cryptocurrency so unique and why has it been so well adopted? One good answer would be Blockchain.
Blockchain technology is what makes cryptocurrencies so special. Blockchain is a P2P (Peer to peer) technology with no central server. So, instead of 1 server where an application runs from, there are a lot of smaller computers connected to the network and taking care of all the processes together.
This means that the data is not centrally stored, which makes the data within them very hard to alter. It also makes the data more hack-proof, since instead of trying to hack 1 server, you would have to hack many smaller servers.
That is not the only safety measure present within the Blockchain technology, it goes deeper than that. The blocks that compose the Blockchain contain 3 types of information: Data, Hash (a string of code), and the Hash of the previous block. The data stored in the blocks is different for each block, and therefore serves the purpose of the cryptocurrency in it being unique.
(Almost) all blocks contain also transactional information: From, To, and Amount. So for example; Me (from), sending 10 of a currency (amount) to a person (to). Within that process, that data will be hashed, which is a string of code. That’s already two of the 3 ingredients to create the block. The third ingredient is the hashed data of the previous block, which is what ties one block to another, creating the chain.
As we now know, there is no centralized server in Blockchain. Instead of that, there are many smaller servers (computers), which are actually people just like you, and in some cases companies, plugging into the network.
When you plug your computer into the network, you get a full copy of the whole chain. When a new block is created after a certain period of time, everyone plugged in will start calculating the new block. When the block is validated, it will be added to the chain, and will pass as a new valid block. If the block is not valid (for example, someone hacked the chain that they have by sending more currency than they own) the block will be removed and not executed.
The ones calculated as a valid block, will be rewarded with currency. This is called mining and can be highly profitable, which is why some companies basically exist based on performing these actions to gain currency, thus money.
So, what does it mean for us, or maybe for you?
Now that we have a superficial introduction on how cryptocurrencies work, especially regarding the safety measures they present, we think to ourselves: How will this affect us? What can we do to adapt to all of this new technologies?
In no time we will all start encountering services which make use of the blockchain. It is already possible to pay in webshops with Cryptocurrencies. Another example is a data storage service like Dropbox based on the blockchain technology, or maybe we will find ways to incorporate blockchain in the development and/or improvement of our own products.
Another great example is video rendering through the blockchain: Before blockchain existed, you needed to have this amazing computer to render videos (and not take days doing so). Taking the Toy Story movie as an example: to render that on a “normal” computer that a particular user would have, it would take about 30 years to render the whole movie. With Golem, it only takes minutes by using their blockchain services, by paying in “Golem”, their currency. Blockchain will (and already is) making our lives easier, cheaper, and more transparent.
One thing is for certain: It is something to take into account, and you will encounter it sooner or later, especially if you want a secure way of handling data in a fast and scalable way.