What is Blockchain Technology?

The blockchain is a breakthrough technology that powers many of the cryptocurrency networks that we recognize today. At a general level, blockchain technology showcases some of the most groundbreaking solutions to networking issues in human history. To explain what a blockchain is and how blockchain technology works, we will explain networks on an abstract level and then discuss the pros and cons.

Before Blockchain Technology – The Traditional Network System

A network, in precise terms, is a collection of points (nodes) with connections in between certain nodes. A practical example of this that has stood the test of time throughout human history is the mail network. If you want to create and support a system that allows messages to be sent between any two parties, you must first pinpoint their locations and find a courier to carry out the transaction. All systems that allow users to make transactions of any type, such as a telephone service or a shipping agency, use systematic networks to carry out their respective transactions.

Unfortunately, networks come with a set of inherent issues. The largest of these is security, both in ensuring that a transaction is recorded and processed, and preventing any outside interference from jeopardizing the transaction.

Imagine that you want to send a paycheck to an employee who lives in another neighborhood. Firstly, if the transaction is not recorded properly, there would be no legal evidence to certify  that the transaction ever took place. Secondly, if the paycheck is intercepted by a thief, the transaction is immediately compromised. Security issues like these are allow for modern-day fraud, theft and other crimes that imperil our financial security.

The next big issue of networking is network maintenance, or more specifically, how to maintain the connections, reliability and security of a network given a limited number of resources. When the Medicis ruled the financial world of Renaissance Italy, they required both thoroughly-inspected accounting books and physical groups of mercenaries to protect their wagons of gold from highwaymen en route to their destinations. It remains clear that whenever an individual or organization wishes to establish a reliable network, these issues must be taken into consideration. The blockchain as a network innovation addresses these very problems.

Blockchain Technology Explained – An Evolution of Traditional Network Systems

The first Blockchain was implemented by an anonymous person/organization known as Satoshi Nakamoto in 2008. It used a digital, public ledger to record transactions over a network of digital tokens known as Bitcoins. At the time, cloud computing and peer-to-peer networking was gaining popularity for its decentralized approach to network security and data storage. The goal behind both of these technological advancements was to process and store data across a network of computers instead of in one single place, thereby allowing users to enjoy a greater level of network and data security. The problem with the solutions at the time was how they used resources to maintain the network. The computers in the network that supplied the network’s power were personal computers used by network participants, but the security and encryption of data across the network had to be supplied by the large organizations that owned the networks. This made cloud computing costly, effectively becoming a privilege only for those who could afford to pay high fees to such corporations. However, the technology behind the Bitcoin blockchain posed a different solution.

The overall goal of the Bitcoin Blockchain’s implementation was to make network security the effort and responsibility of the crowd instead of the corporation. To do this, Satoshi Nakamoto created a network that could be used to send tokens from one node on the network to another. To record these transactions, the network would place these transactions inside a chain of connected blocks, or in other terms, the blockchain. Securing these blocks requires volunteers to contribute computing power toward solving cryptographic puzzles whose solutions would be used to encrypt the blocks. This would therefore complete the blockchain, creating an immutable, visible, public ledger of Bitcoin transactions.

In exchange for solving these puzzles and securing the ledger, these “miners” are rewarded with newly created tokens or Bitcoins. However, if a miner places a new block on the blockchain, their block is still subject to review and crowd validation. This process is called blockchain consensus.

Blockchain Consensus can either approve or reverse a transaction based on how it views the overall validity and security of the new block. If the transaction is reversed, the block is deleted and the miner will not receive the coin. Users can tell if their confirmation has been secured correctly based on the number of blocks placed after their transaction. This number of blocks is known as the number of blockchain confirmations. The more confirmations, and the greater the velocity of confirmations on the blockchain, the more secure and reliable you know the blockchain is in carrying out your transactions. It was in this fashion that Satoshi Nakamoto created the first peer-to-peer network powered and secured solely by anonymous contributors. Therefore, networks that utilize blockchain technology provide peer-to-peer networking services that come with completely decentralized data storage and security.

The Blockchain After Bitcoin

Since Bitcoin’s inception, numerous other blockchains have been created to expand upon the potential uses of decentralized, peer-to-peer networks. Ethereum brought forth a network in which users could implement applications for any digital transaction in exchange for using the Ethereum token. These self-executing, digital transactions are known as smart contracts; a contract between two parties that executes itself as an automated digital transaction once it has been signed.

Bedrock’s powerful abstraction layer is designed to make blockchain and cryptographic protocols as accessible to financial institutions as internet protocols. Our flagship application, the Ethos Universal Wallet, is built entirely on Bedrock, giving users the opportunity to safely store and transact a multitude of cryptocurrencies and digital assets all on one platform using one private SmartKey. We do all of this and more as a part of our mission: to bring into being a new, accessible, digital world economy.