How many times a day do you hear about bitcoin, Ethereum, web3, blockchain, etc, you might have wondered What is it? How does it work? Can I a piece of the pie? If you've ever wondered about any of these questions then I hop this article can help you in understanding the what and how of blockchain.
What is the Blockchain?
Now there are multiple interpretations and ways to explain Blockchain but I find this definition to be the most comprehensive
Blockchain is a distributed immutable ledger.
I know that this is not clear at first but let me explain it and I'm sure that you will have a clear image of what it actually is and what is meant by this definition.
What is a ledger?
To define it simply, A ledger is a collection of transactions. For example: You went to a super market to purchase some goods, When you are at the checkout The cashier enters data into their systems and then that transaction is stored on there system. Now the place where this data is being stored is called a ledger. Given below is a dummy ledger.
Now as you can see that each row shows a transaction similarly, each block in blockchain stores a transaction. The image below will help you in visualizing in what a blockchain looks like.
As you can see in this image it's a series of blocks joined by chains, each block stores a transaction. Now that that's clear.
What is immutable?
unchanging over time or unable to be changed.
-- Definitions from Oxford Languages
As suggested by the definition immutable means unchangeable. Now, what does that have to do with what we are learning?
Now if you see the ledger or the example is given above, We are using some database or some paper to record the transactions, But one thing that you might find common in these methods is that these can be easily altered.
Compare that to blockchain Once a transaction has been recorded it cannot be changed this is one of the most important concepts to keep in mind when working with the blockchain.
What does distributed mean?
Distributed means shared or spread out. Now keeping this in mind we now know that blockchain is spread out, But what do I mean by that.
This means that all the information is spread out to all the systems in the blockchain. Each system has a copy of the blockchain.
Now that we have Defined the blockchain, Let's see how it works.
Now this is what the systems look like. Now each system has a copy of the blockchain. Containing all the transactions.
Now consider one system process a transaction. After it's done processing it sends out all the information to rest of the systems.
The process of processing transactions is known as mining. Now that we know how the blockchain works let's look into why some cryptocurrencies are worth more.
Yes, the heading is totally right there are multiple blockchains and each cryptocurrency lives on it's own blockchain. Think of it like this each company has it's own ledger similarly each cryptocurrency has it's own blockchain.
Judging the worth
Now one question that comes into our minds is why some blockchains are worth more than others. That is because each blockchain has it's own unique pros and cons to further elaborate let's compare the two most popular cryptocurrencies/blockchains.
Comparing eth and btc
Now even if you are new to all of this I'm 90% sure you might have heard of eth and btc. Btc was the first cryptocurrency but you couldn't actually do anything with it. That is where the Ethereum blockchain introduced itself, Because not only was it a currency but you could also make Dapps for it which means we can actually buy something with it. NFT's are a great example of how this works. Stay tuned for an article on introduction to that as well.
Keep in mind the shit coins that are getting popular day by day have no uses as well as they are just being used for pumps and dumps which means to just buy low and sell high.
I hope that this article was useful and helped you in better understanding the blockchain and how it works. I'll also be uploading an article on what are the generations of web and how to get started on building Dapps etc. So if you are interested then drop a follow and join my newsletter.
If you have any questions ask away in the comment section below. I'll be happy to help.
Bye for now.