This month we’re focussing on ‘Bitcoin and Blockchain’ and how it’s changing the future of entrepreneurship. Bitcoin, Cryptocurrency, Blockchain — you must have heard about these buzzwords and maybe the stories of people making a quick fortune out of it.
Are you confused by what it all means and how it works? It’s never too late to learn! In this article we dig into the basics of these innovations, how they work and why they matter.
Blockchain is the key technology behind Bitcoin. It’s a new network that helps decentralize trade, and allows for more peer-to-peer transactions.
The technical definition of blockchain is a decentralized, distributed and incorruptible digital ledger that is used to record transactions across many computers.
Does this sound a bit complicated? Don’t worry, blockchain is simply a:
To sum up, it’s a shared ledger for recording the history of transactions that cannot be altered.
But why do we need blockchain? Transactions take place every second and often, each participant has his own ledger. Having multiple ledgers is a recipe for error, fraud and inefficiencies. The aim of blockchain is to see a transaction end-to-end and reduce these vulnerabilities.
Blockchain is distributed which means that it works as a system of record that is shared among participants of the business network. This eliminates the need to reconcile contrasting ledgers.
What’s more, blockchain is permissioned. Each member of the network has access rights so that confidential information is shared on a need-to-know basis.
Lastly, blockchain is secured using cryptography. Consensus is required from all network members and all validated transactions are permanently recorded. No one, not even a system administrator, can delete a transaction.
Cryptocurrencies are essentially just digital money, digital tools of exchange that use cryptography and blockchain technology to facilitate secure and anonymous transactions. Blockchain is a concept and cryptocurrencies are the applications using that concept to solve real problems.
“Cryptocurrency is to blockchain, what email is to internet”.
Bitcoin and other cryptocurrencies don’t just fall out of the sky. Like any other form of money, it takes work to produce them and for cryptocurrency that work means mining.
Cryptocurrency miners solve complex mathematical problems in order to mine cryptocurrencies. Miners also verify transactions and prevent fraud. This means that the more miners there are, the faster, more reliable, and more secure transactions become.
Super powerful computers called Application Specific Integrated Circuit (ASIC) were developed specifically to mine Bitcoins. Unfortunately, because so many miners have joined in the last few years, its becoming more difficult to mine a lot.
This is because the founder of Bitcoin, Satoshi Nakamoto, ensured that there would only ever be 21 million Bitcoins in existence. The solution to this? Mining pools which are groups of miners who band together and are paid relative to their share of the work.
Want to learn more? This month we’ll be covering how blockchain will change entrepreneurship, trends in cryptocurrency that entrepreneurs need to know and more. Subscribe to our newsletter here to get the latest articles.