You have probably heard the word blockchain mentioned a couple of times whenever you browse the internet or hear your friends talking about new investment opportunities. But what is Blockchain?
In this article, we shall explain what blockchain technology is and also look at some of its defining characteristics.
What is blockchain?
Blockchain as the name suggests is a chain of blocks. And these blocks are made up of digital data.
Therefore, blockchain can be described as a database that stores data in a chain of blocks.
It is sometimes referred to as the blockchain network since the chain of blocks forms a network over which users can access the stored information and also add more blocks of information to it.
Blockchain networks are decentralized; meaning they are not governed by a central organization but rather their existence and growth depends on the users.
Characteristics of blockchain networks
Blockchain has several unique characteristics that have enabled it to transform almost every industry from finance, transportation, logistics, farming, communication, defense, space exploration, supply chain, manufacturing to medicine.
These characteristics include:
Blockchain networks are decentralized in nature. Therefore, they are not controlled by governments or central bodies like central banks.
- Cryptographic encryption
Information or data shared in a blockchain network is cryptographically encrypted to ensure that only the intended receiver can decrypt and get the content. This makes the data that is stored in blockchain networks secure.
The blocks of information stored in blockchain are the ones that make up the specific blockchain network. Therefore, the data/information cannot be changed because doing so would mean bringing down the entire blockchain network. This makes blockchain a perfect place for storing immutable data.
- Smart contracts
Smart contracts were introduced by the Ethereum blockchain and they have become the core of blockchain automation.
Smart contracts are simply computer programs that automatically execute certain tasks according to the specifications provided in their algorithms.
What are cryptocurrencies?
Cryptocurrencies also referred to as digital currencies or digital tokens are the digital assets that are used as a medium of exchange in blockchain networks.
And since they operate in the blockchain networks, they are also decentralized; they are not regulated by a central bank or any other central body. Their value is determined by the users depending on several factors.
Besides being used to perform certain tasks and paying for services or products in a blockchain network, cryptocurrencies are also traded on crypto exchanges.
Examples of exchanges where you can trade cryptocurrencies include Binance, Coinbase, LocalBitcoins, Kraken, BTCC, Huobi, and BitMex among many others.
Which was the first cryptocurrency?
The first cryptocurrency to be developed was Bitcoin (BTC). It was launched in 2009.
Bitcoin (BTC) operates on a blockchain called Bitcoin, which was developed solely for use as a medium of payment.
Bitcoin has maintained the lead on all other cryptocurrencies by being the most valued cryptocurrency around the world.
What are altcoins?
The other cryptocurrencies that were developed after Bitcoin are referred to as altcoins.
They include the likes of Ethereum (ETH), which works on Ethereum blockchain, Litecoin (LTC), which works on Litecoin network, Ripple (XRP), which works on Ripple blockchain, NEO which works on NEO blockchain, and Cardano (ADA), which works on Cardano blockchain among many others.