What is the relationship between Bitcoin digital currency and blockchain technology? Along with Bitcoin, another word that comes to conquer space on the networks is Blockchain. In this article, we will see its relationship in detail.
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Bitcoin and Blockchain: What is Bitcoin currency?
Bitcoin is a virtual currency, a digital currency, that is, a currency that doesn’t exist physically like our money, like weights or any other currency.
It was born in 2008, to replicate the shortage of physical money in the electronic environment, but it does not require the intermediation of a central authority.
Precisely because it is virtual, Bitcoin has a great advantage. The fact that it is a decentralized currency was a great motivator for the creation of Bitcoin.
It was created to be a global currency where no one has power over it.
It is transparent, it does not depend on any financial institution, nor on any government, and it does not have intermediary agents like banks. With Bitcoin you are your own bank, you simply control your money.
All this is possible thanks to a logging technology that Satoshi Nakamoto, the author of Bitcoin, developed and that became known as Blockchain.
With the Blockchain technology, transactions are recorded and made available to the public for anyone to access, meaning that the blockchain has a history of all transactions that have occurred since Bitcoin was implemented in 2009.
What is Blockchain, and what is it like?
The blockchain is the engine of each cryptocurrency, it is responsible for its operation.
Blockchain is simply the engine of each digital coin, not just Bitcoin, but any other coin, the chain of blocks is the engine, it’s the validation, it’s what makes the mathematical calculations behind the cryptocurrencies.
Miners, use blockchains to validate their coins, like a person sending their Bitcoins to another person or from a Bitcoin exchange to another person.
To better understand this, we need to talk about Peer-to-Peer technology, which we could call Blockchain’s mother.
Many of you may not even know what peer-to-peer is, but you’ve already used it on the Internet.
In the past, the servers or any of the files available on the Internet originated in one location, what does one location mean? Let’s say there are two computers.
The computer on the left is you and the computer on the right is me, so when we download something from the Internet, let’s say we want to download an anti-virus or free movie or video from the Internet, we will send a command from our computer to a server, the information will go to the server where we want something and this information will come back to you.
We call this process downloading and uploading, so when you enter a piece of information, it makes the server perform an upload and when it receives this information back the server is doing a download.
Understanding that this is the most archaic method of using the Internet, if this server is inactive, if it is in the air, what happens is that we all lose the connection with the server.
If you are downloading in real-time, I, you and other people are downloading some files from the server, if the server is down, we would no longer have access.
To me, you and other people who are downloading some files from this server, we would no longer have access.
How many of us have ever had this happen to us? You started downloading a file and then there was an error message. This used to happen and a lot, but nowadays not so much.
Now let’s better understand where peer-to-peer technology comes from.
Remember that in this scenario there are many computers or many people around the world and only one server trying to do all this, trying to manage all these accesses around the world.
Let’s now look at something that represents peer-to-peer also known as a torrent.
You may not have heard of the word Blockchain, but torrent you may have.
It’s the technology or the method that we use to make a download. Here, there is no server, or it doesn’t exist in 90% of the cases, sometimes it could even exist, but it will be just another computer. So let’s imagine we have a server outside our computer network, which will simply act like another computer connected to this network. What is this network? This network is the peer-to-peer marketplace. It’s the p2p network.
How can it work? When I want to download a file from the internet, I will have specific software to do a search and this program will do a search with all these people with all these computers that are connected to the network, at this very moment.
All the people that are online at this very moment will receive a message, they will be searched with the keywords that I insert in my computer.
They will start transmitting this file and this file will be gathered inside my computer.
When I start downloading the file, this file will not come from a single source, so let’s say that all these computers have the same file that I am interested in or only three of them have the same file.
I will start downloading fragments of this file from all these computers. When I start downloading, I am not downloading from one source, just this computer, for example, but I will download from the server, the computer on top and the computer on the bottom.
So consider how easy the work has been for the server. The download is distributed not only within the server, so I am downloading the file from three different sources so that the file will come not only from the server, if the server has the file, but it will come from other peers that have the whole file or parts of it.
So when I start downloading, I’m not downloading from just one source from this computer.
For example, nowadays everybody is connected to everybody. Does this work better? As a result of this is the Blockchain network.
Instead of doing this download from another computer, it will validate the transactions, validate the banking part even though there is no bank, but it will validate the financial transactions.
So let’s say that when I get a Bitcoin and transfer this digital currency to a person, it will be validated by each of the computers connected in the blockchain, so all these computers in this blockchain will be aware that this transaction has been made through the Blockchain network.
All the computers connected to the blockchain work as a backup that the blockchain is secure.
If a hacker were to invade the server, this hacker would not be able to do so by hacking into only one server.
He would have to invade not only the single server, not only the server itself but all the other active computers connected to the blockchain around the world that would be linked or connected to the Bitcoin world.
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Every time a person sends a Bitcoin to another person or when a miner is finally able to collect a Bitcoin and send it to his wallet, this is validated and everyone in the network knows that this happened and then can see that the hashes of the transactions have been made, so this is what we call an open book when anyone in the system can verify the transaction.
You can go to the Blockchain.info website, and see the transactions that were made.
For example, I sent a Bitcoin to a person and I want to know if this Bitcoin has already reached this person.
So every time a person requests something like a payment slip, you can go to their history, you can go to their transaction or withdrawal history and you can check their balance and history.
You can see the status and confirmations, here they show you the hash of the wallet.
All transactions have a hash, which is the ID also known as a hash. You will copy this hash and paste it into the Blockchain website.
Here we can see how many validations have taken place.
This would be our proof of payment, when you look for this information or when you hear about the blockchain technology or when you think about validation, any time you do it and make a transaction, you can follow it and track it.
What are the upsides of Blockchain?
We can conclude that Blockchain has many advantages, among them the security that it has due to cryptography.
Also, the records are kept in a distributed way, which means that the different users keep a copy of the blockchain and any failure in the network does not change the operation.
The blockchain is a way to store data in a secure, transparent and decentralized way.
It has been called a “trusted protocol” because it makes people who do not know and trust each other to perform secure transactions.
Blockchain and Bitcoin not only go hand in hand but Blockchain technology is also being developed in other industries due to its widespread use.