.You may or have heard your friends or family talk about Bitcoin, whether it's a fun discussion or just small talk in your spare time. The popularity of Bitcoin is indeed on the rise, especially with speculative claims that this crypto currency can replace the paper currency we know everyday. Even though it is still a discourse, Bitcoin has proven to have benefits that are not currently provided by existing financial services. This benefit comes from the Blockchain technology used by Bitcoin. In short, Blockchain is the "magical" force underlying the creation of bitcoin. While you may have heard the term "Blockchain," you may also be wondering what it means and how it relates to bitcoin. Dont worry! In this short article we will dive into what blockchain is, how it works, and how it relates to Bitcoin. By the end of the paragraphs of this article, you will have a clear picture of how Blockchain is set up to transform many traditional systems, with currency being one of the first.
What is Blockchain? Blockchain is a digital transaction storage system that permanently records all transactions stored in a public database (or ledger). In essence, Blockchain ensures that the trustworthiness and validity of transactions that have occurred will be stored eternally in its database. This allows the Blockchain to digitally store and transfer value because any monetary input a transaction has can be considered correct. In a traditional system, records of transactions that have taken place are kept by a central authority such as a bank, which collects and owns the transactions in their private databases. To ensure the trustworthiness and validity of transactions, central authorities need to maintain end-to-end protection of their databases and prevent hackers from modifying the information of their stored transactions. However, this method has a flaw because the central authority is the authoritarian owner of the data and is a single source of failure that is very vulnerable to hacker attacks. Contrary to traditional systems, Blockchain is a secure method for storing data because it doesn't depend on a single central authority.
How does blockchain work? To put it simply, Blockchain literally means "block chain". In other words, Blockchain is a collection of transactions (blocks) stored in a public database (chain). The block contains information about all transactions that have occurred such as date, time, dollar amount, participant's digital signature, and unique transaction code. Each block can store hundreds of transactions. The created block will be added to the block chain. Each block contains its own unique code (also called hash) and also contains the previous block's unique code. Each block is bound to the previous block, thus creating a chain of interlocking blocks. If you imagine vertically, new blocks will be stacked on top of the existing blocks. Because the next block contains information from previous blocks (in the form of hashes, for example), hackers who want to change the transaction information in a particular block change not only one, but all the blocks stacked on it. Of course, it takes enormous computational power to run this, so Blockchain is almost impossible to hack. Blocks are created by a worldwide network of computers (also called miners or nodes). Thousands of computers around the world compete to create blocks by solving mathematically complex algorithms. Every miner who finishes the problem and creates a new block will receive a reward. This ensures that blocks are continuously being created and that transactions will continue to be stored on the Blockchain. Simultaneously, the participating computers go through a process called consensus, where they confirm the transaction information in each block and store it independently. Since transactions are stored independently on each computer, it is almost impossible to change transaction details as all computers need to provide approval. Contrary to the one source of failure facing central authorities, Blockchain does not depend on a single computer. This means that hackers have to hack or control at least 51% of all participating computers, which is similar to hacking a stack of blocks.
Correlation between Blockchain and Bitcoin Transactions stored in blocks represent essentially data, hence Blockchain can be applied to any field that requires online storage of assigned values, including property rights, identity records, and more. Cryptocurrency is the first use case to use Blockchain technology. In the case of bitcoin and blockchain, the transactions mentioned above are transfers of money between people. Although the internet allows us to transmit information, it does not have the ability to maintain information immutability. This causes the internet to not be used to provide monetary value, because this value is vulnerable to change. By leveraging the Blockchain, Bitcoin ensures that the value of transactions sent between individuals does not change. In addition, the transaction fees for entering transactions on the Blockchain using Bitcoin are much lower than those charged by current financial services, making the use of Bitcoin even more effective. Unfortunately, Bitcoin still has some drawbacks, such as price volatility and slow block creation times. This of course is not without reason. First, Bitcoin is not secured by any underlying asset, therefore its price is determined by speculation how well it will perform in the future. Second, Bitcoin is designed to create a block every 10 minutes, which limits its ability to increase the number of transactions it can hold on a large scale. Although the current Bitcoin and blockchain settings are irreversible, other cryptocurrencies are constantly developing and improving designs that allow them to have stable prices and faster block generation. In the future, Blockchain is predicted to shake up the financial industry, supply chain, crowdfunding, and many more. I believe the future is near and it's time for you to take your first steps into the world of crypto. The easiest way to do this for Indonesians is through the Pintu app. Pintu is the easiest mobile application for Indonesians to buy and sell Bitcoin (BTC) and other digital currencies such as Ethereum (ETH), Tether USD (USDT), Rupiah Token (IDRT) and Binance Coin (BNB).
