Blockchain came into the limelight in 2008 with the invention of Bitcoin. Since then, it has developed over the decade and today it’s the biggest technology. Blockchain helped bitcoin to run. Therefore, there is a difference between blockchain and bitcoin.
In 2014, research begun to find out how blockchain can be used outside cryptocurrency. The blockchain is a peer to peer online ledger that uses cryptography for security. It is highly immutable, append-only and can be updated through an agreement between peers only.
Since then, numerous organizations such as banks, transport, healthcare, supermarkets, insurance, voting and many more are using it. According to research, 15% of banks are using blockchain technology.
In 2013, the ethereum co-founder Vitalik Buterin, who was at the time working as a programmer for Bitcoin, pushed for the formation of the blockchain. Vitalik created the second blockchain known as ethereum. Ethereum was launched in 2015.
It differs from Bitcoin in that it can record not only crypto but also smart contracts. A smart contract is an automatic process that is conditional that is written on the blockchain.
The smart contract has since attracted big companies like USB, Microsoft among others. Smart contracts are secure hence they save money and time.
Learn more about Smart Contracts
Proof of Work
Blockchains work on the proof of work (PoW) concept. This is a computer mining process that leads to the creation of blocks. Therefore, a transaction started by a client is changed to a block.
The transaction can be verified by miners by solving complex computer problems. The miner to solve the puzzle first is rewarded. After solving the mathematical problem, the transaction is verified. A verified transaction is recorded in the blockchain.
Learn more about Consensus Algorithm,
Proof of Stake
It works with the same principle as PoW – to verify transactions. However, the proof of stake (PoS) uses algorithms. Also, in the PoS the miner is not rewarded for solving a problem. On the contrary, they get transaction fee. The merit of PoS is that it is energy efficient and it’s not expensive.
We made a comparison between two Blockchain consensus algorithms.
Since every transaction is recorded on every computer on the blockchain network, it can lead to slowness. Therefore, scaling is necessary. Scaling is the process of allowing a specific number of computers to record a transaction. However, the number of computers selected should be enough not to compromise security.
The future of technology is going to be transformed by blockchain technology. More and more uses of blockchain are likely to be discovered as time passes by. Currently, Scaling Blockchain is one of the biggest challenges.
Learn more about Blockchain Scalability Problem
There are various kinds of blockchains. The different types are based on how the blockchain evolved. The major types are as follows:
It is also known as permission less ledger. This is a blockchain that is open to the general public. Anyone on the internet can take part in the decision making. When someone participates in decision making, they may or may not get a reward.
The ledger of a public blockchain is not controlled by anyone. Whenever a transaction is made, a copy is shared with every user on the internet. When a decision is made, a distributed consensus is used.
As the name suggests, these kinds of blockchains are available only to a specific group of people. These groups of people or organizations share a ledger among themselves only. An example of private blockchain includes.
Blockchain Use Cases
3. NEO – this was the first open source decentralized crypto. It was started in China. It offers free GAS tokens to its members.
4. IOTA – it is a block less chain which gives free transactions. It also has a unique process of verification. This helps to solve most of the scalability problems.
5. QTUM – it works on smart contracts. It combines ethereum’s virtual machine and bitcoin’s core making transactions optimized.
6. Nano – it works similarly to IOTA. It has free transactions with less energy consumption as compared to bitcoin.
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