Blockchain Basics
You might have heard that Cryptos are “unhackable”, secure or have other characteristics, but let’s begin with the fundamental technology.
We will start by taking a look at what kind of blockchains there are and how they work. All types of Cryptocurrencies are based on a distribution system;
therefore, they are often described as distributed ledgers. Here the information is not saved in a single place, but on millions of computers in the network. Each computer saves either the full or only parts of the blockchain.
The most used form is the public blockchain, where everyone has access and can read and add information. Due to this freedom, this type of blockchain is usually the slowest version. Users are participating anonymously/pseudonymously.
(The latter means that the user is anonymously active, but transactions could be calculated back to the end-user; therefore, they are not 100% anonymous.)
The second possible type is a consortium blockchain, which only uses specific crossover points for validation. As a result of this only participants of the “consortium” have access to the blockchain, this guarantees a faster process, and the creators can decide if participants are public or anonymous.
This form will be very interesting for business adaptions, which we will discuss and explain at a later point of this book in greater detail.
The third type is an entirely private blockchain; here transactions are validated by a certain amount of validators. The creator can decide who can add information or see it. This results in a very fast processing time, and the creator usually knows each validator.
You may question yourself, what is a blockchain or how can I imagine it. As the name suggests, the blockchain is a linkage of several blocks. The specialty is that each block is generating code, based on the content it carries, which is saved in the consecutive block with other new information. But let’s look at an example, which might be easier to understand:
(Assuming “Peter lends Helen 50€”. The Block in the blockchain is saving this information and produces a code based on the order of the letters and numbers used – let’s say AAAAA. If Helen would get access to one block and changes the information to “Helen lends Peter 50€” the outcome of this block would not be AAAAA, but BBBBB. Therefore, the blockchain would directly show that some information has been changed, because of the error report of other computers in the decentralized network.)
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