What we’ll be covering today:
- What is blockchain
- The components of a blockchain
- Blockchain as an ecosystem for payment
- Closing thought
- The word blockchain is a combination of two words “block” and “chain”
A block in terms of discussing the digital mode of payment contains transactions e.g Mary sends John 1BTC- this transaction is sent to the block after it's being validated. These blocks are publicly displayed on the network waiting to be validated
So we say blockchain, we are talking about a public ledger where written/sent transactions are recorded
2. Component of a blockchain
A public ledger: is like a communal ledger that records payments between two parties, it's publicly displayed in such a way that anyone can see the total amount of transactions that are therein and also add transactions to the ledger.
For better clarity, we will be using the Bitcoin network/protocol to explain in detail how the blockchain works, let's dive in
Let's make use of two characters Mary and John
John is a content creator, and most of the time he employs Mary who is a good marketer to help take his content to the right audience, let's say the service has been provided it's now time for John to pay Mary, then Mary decides to collect her wages through the Bitcoin.
So what the two of them will do is, they’ll both go to the Bitcoin network and then the network will ask them to both create a seamless means of performing this transaction.
They both create what is called a digital signature; a d digital signature contains a private and a public key
Private key: is like your ATM pin, you keep it secret and it's not to be shared with anyone
Public key: you can share this with anyone
So Mary will have to share her public key with John to aid the transaction.
When the transaction is sent on the Bitcoin protocol it goes to a pool on the network called the mempool.
A mempool is a pool on the Bitcoin network that receives transactions from the sending and keeps it, waiting for the “miner” to come and verify it to be sure it's not double spent
A miner runs the computational work on the Bitcoin network - which is the process of validating a particular transaction and block. So the miner does the computational effort by checking if the transaction ID is attached to something called a hash
A Cryptographic hash is a system used in computer science for security purposes
So what the miner does is that after validating the transaction the miner takes the transaction from the mempool to a “block”
A block in the Bitcoin network contains a list of validated transactions that have its hash function attached to it
So the miner takes the block - which contains a maximum of 2,400 transactions per block, with a size of 512 kilobytes. The miner displays the block to other miners in the network for it to be added to the chain.
The first block that was mined in the Bitcoin network is called the Genesis block, this block was mined by the founder of Bitcoin himself - Satoshi Nakamoto. Ever since then they've been thousands of blocks have been created on the Bitcoin protocol.
3. Blockchain as an ecosystem for payments
For payment/transactions to be carried out successfully between two parties, they have to go through the process of decentralized validation, which goes in, hand in hand with other transactions that are going through within the period.
So the way the network works is that; a block is created on an average of 10mins, and when the block is created it's validated and then given a “hash”. All the blocks in the network are chained together, starting from the Genesis block to the present block that is being mined at the time of this write-up, when they are chained together in this unbroken chain secured by a hash - it's called a “blockchain”.
So John authorizes the transaction by signing it with his private key, which automatically changes the ownership of that particular amount of Bitcoin from being John's own to that Mary's own using her public key
4. Closing thoughts
Interesting to also note that every other blockchain ecosystem that exists today outside of the Bitcoin network, borrowed its idea from Bitcoin technology i.e you will always see traces of some of the technology that Bitcoin uses in their ecosystem.
So we could say what we call blockchain today was made possible by the invention of Bitcoin.
