Written by: Scott Liu
If you have been on internet recently, the word “Bitcoin” or “Blockchain” should be familiar to you. Scott Liu is here today to tell you everything you need to know about the Blockchain.
Bitcoin, or Blockchain currency is usually being described as the “Next big thing” and has gained attention from many investors in the last few years. Its value has raised drastically from 6.18 USD for 1 Bitcoin in 2012 to 15,527.80 USD in 2018.
But, what IS Bitcoin?
Basically, Bitcoin is just a type of currency. And it has the following characteristics that made it special:
- It is encrypted. Bitcoin is a collection of data that can be stored in a computer.
- It is decentralized. Meaning that there is no authority that have control over the currency.
Some of you mightbe wondering about how can a currency be safe and trust worth when it is decentralized and how are transfers being made. Let’s run through a situation and see how bitcoin works.
Imagine that you are borrowing $100 from a teacher. As she gives you the money, the students in her class take a note of her borrowing you 100 dollar. And if you later decided not to return the money, all of the student who were present in the class on that day will know that you owe her $100.
In this situation, the transfer happened without any governmental overwatch and the teacher’s money is secured. And that is the basic idea of using blockchain to achieve decentralized currency.
But, why should the students take record of how much money was lended?
Again, let’s imagine that you are borrowing 100 dollar from a teacher. As soon as the first person finish writing down a full record of you lending money from her, the student will scream: “I have it!” Then, all the other student will throw their current progress. The student who have the recording, will then be able to have 1 dollar from the 100 dollar transfer.
So the first recorder will be rewarded by a fraction of the transferred money and that will keep all the members motivated to record more transfers.
You might be able to picture this in real life and even connect to some Bitcoin terminology already. If you still struggle to get a full picture, here is a list of corresponding terminologies:
- Money borrowed = Bitcoin
- Students = Users (Can be anyone)
- Notes = Blocks
- Taking notes = Bitcoin mining
That was a brief introduction about Blockchain and Bitcoin. If you are interested in knowing more about decentralized currency system, or information technology you can check out Byzantine Generals Problem and Two Generals’ Problem on Wikipedia.