What is Blockchain and bitcoin?

When was the last time you bought a brand name item? Like a luxury phone or maybe a watch. How could you tell that that watch or those phones were genuine - and that it wasn't a knockoff. Or... Say you want to make a multi-million dollar investment in a work of art. Say a painting or maybe a sculpture. How can you tell that that painting or sculpture was actually made by the artist that they're claiming that it was made - or that it wasn't stolen? Being able to have accurate information about the provenance and the history of any item of value is essential. But in a world where we're dealing with malware, you're dealing with hackers, you're dealing with all sorts of counterfeit goods being put into supply chains all over the world. It's becoming increasingly more difficult to prove the authenticity, and guarantee the integrity of any item of value that you're buying. There is an answer and it's a technology called blockchain because blockchain can provide you a single source of truth that's permanent, verifiable, and unchangeable and that is what this article is all about.

What is Blockchain?

Let's look at a definition of what a blockchain is. The blockchain is a regularly growing ledger that keeps an everlasting record of all the transactions, in a secure chronological and immutable way.

What is Bitcoin?

A bitcoin is a type of digital asset that can be bought, sold, or transferred between parties securely over the Internet. therefore it can be used to store value, much like buying gold, silver, and other types of investments. But unlike those other types of investments, it also serves as a form of digital currency, and you can use it to buy products and services as well as make payments and exchange value electronically. However, different from other types of traditional currency such as dollars or euros which you can also use to buy things and exchange value electronically, also keep in mind that there are no physical coins for Bitcoin or paper bills. And when you send bitcoin to someone or use bitcoin to buy anything, you don't need to use a bank, a credit card, or any other third party type of clearinghouse. Instead, you simply send bitcoin directly to another party over the Internet and it will arrive securely and almost instantly.

How Bitcoin Works

Whenever you send an email to another person, you simply type in their email address and you communicate directly with that person. It's the same thing when you send an instant message. This type of communication between two parties is commonly called peer to peer. And it's how people communicate every day over the web. You can send photos, videos, and other types of files easily and quickly over the web. However, whenever you want to send money to someone over the Internet you need to enlist the services of a third party such as a bank, a credit card, PayPal, or some other type of money transfer service. You can't simply just attach some money to an e-mail and send it to someone like you would send a photo or some other document.

Why is that?

The reason is that whenever you do a transfer of value between two parties, you need to ensure that a real transfer has taken place. In other words, you need to be able to verify that both parties have done what they need to do in a real exchange.

For example, if I send a photo I like to another person. I can simply attach that photo to an email and send it. The other person will receive the photo, And that's where you think it would end. But not quite. We now have two copies of the photo. The one I sent by e-mail, and the original file which is still on my computer. What I really did was e-mail a copy of the file with the photo, not the original file. 

This case is commonly known as the double-spend problem, and why we currently have a need for banks and other types of institutions to act as middlemen in these types of transactions. Without these intermediaries, people could simply try to copy and paste money and it would be impossible to determine if the transaction is real or not. Even so, if the double-spend problem presents such a challenge, How is it that you can send Bitcoin to someone else over the internet without needing a bank, or some other institution to verify that a transfer took place?

The answer lies in a global network of thousands of computers called the Bitcoin network and a special type of decentralized ledger technology called a blockchain. Blockchain is one of the key technologies that underlies Bitcoin, as it keeps a decentralized record of all the transactions that have ever taken place on the Bitcoin network. All the information is captured securely by using math and cryptography to protect it, and the data is stored and verified across the entire network of computers. In other words, instead of having a centralized database that a third party such as a bank to certify that a transaction took place, Bitcoin uses blockchain technology across a wide decentralized network of computers to securely, verify, confirm and record each transaction. Because the data is stored in a decentralized manner across a wide network instead of a centralized database, there is no single point of failure. This makes the records which are stored on the blockchain, more secure and less prone to fraud, tampering, or a general system failure than keeping them in a single centralized location.