Blockchain & What does Blockchain mean?

Blockchain is a decentralized digital ledger (a continuously growing list of electronic records) of transactions kept over time and secured using cryptography (a kind of algorithmic code). Blockchain ledger data is distributed across a network of computers. Its users can directly interact with stored data in real-time without the need for an intermediary (a “middle-man” or distributor) to authenticate transactions. The technology provides an independent, tamper-resistant, and transparent platform for parties within the blockchain to securely store, transmit, and process sensitive information.

““One way to think about the blockchain is like layers in a geological formation or glacier core sample. The surface layers might change with the seasons, or even be blown away before they have time to settle. But once you go a few inches deep, geological layers become more and more stable. By the time you look a few hundred feet down, you are looking at a snapshot of the past that has remained undisturbed for millions of years. In the blockchain, the most recent few blocks might be revised if there is a chain recalculation due to a fork. The top six blocks are like a few inches of topsoil. But once you go more deeply into the blockchain, beyond six blocks, blocks are less and less likely to change. After 100 blocks back there is so much stability that the coinbase transaction—the transaction containing newly mined bitcoins—can be spent. A few thousand blocks back (a month) and the blockchain is settled history. It will never change.””

ANDREAS ANTONOPULOS – MASTERING BITCOIN

Change Addresses.

The problem is that the amount attached to these transactions with their inputs and outputs aren’t divisible. So, if Alice has a bitcoin address with one bitcoin in it, and she only wants to send Bob half a bitcoin, then she would have to send Bob that entire bitcoin.

The bitcoin network would then automatically create 0.5 bitcoins in change from the bitcoin that Alice sent, and send it to the third address in Alice’s control. That third address will also be a transaction output, meaning that the address will have multiple transaction outputs.

Over time, this means that bitcoin wallets end up with lots of addresses containing varying amounts of bitcoin and change from bitcoin transactions. When you send bitcoins to someone, your wallet will try its best to piece together the necessary funds using the addresses containing the different amounts.

That leads to transactions that can have several different inputs – different addresses with different amounts used to make up the funds. It’s usually unlikely that these inputs will deliver exactly the right amount, so you normally end up with change.

What if you want to send just a tiny amount of bitcoin? Luckily, you can slice bitcoins very thinly indeed. The smallest divisible part of a bitcoin is called a satoshi, and it amounts to just one hundred millionth of a bitcoin. You can’t send just one satoshi over the network, though – that’s simply too small and would clog up the network with tiny transactions. The smallest transaction value is 5340 satoshis, which is still pretty tiny.

To complicate matters still further, many bitcoin transactions involve a transaction fee, which means that you have to add a certain amount of bitcoin on top of the amount you’re trying to send. If you don’t, then it’s likely that the bitcoin transaction will fail altogether. This is something to consider, especially when sending tiny fractions of a bitcoin.

So, when you open your bitcoin wallet after a few transactions and begin to see multiple addresses containing lots of tiny amounts, that’s what’s happening. It isn’t particularly easy to read and makes bookkeeping a bit annoying, but it does make it possible to trace bitcoin transactions through the entire network – which is important, given bitcoin’s mantra of transparency and immutability.

How Bitcoin Transactions Work.

Bitcoin transactions are more complex than you might think. You rarely simply send an amount of bitcoin in one go. Instead, your bitcoin wallet and the bitcoin network have to go through a set of steps to ensure that the right amount of electronic money gets to the recipient.

Fundamentals of Bitcoin Transactions.

Firstly, it’s important to understand what a bitcoin looks like. It isn’t a single record of a coin, as you might find on an accounting ledger or on your bank statement. Instead, it’s registered as a transaction, comprised of three things: a transaction input, a transaction output, and an amount.

• The transaction input is the bitcoin address from which the money was sent.
• The transaction output is the bitcoin address to which the money was sent. If the bitcoin is in your wallet, that will be the bitcoin address under your control.
• The amount is the amount of bitcoin that was sent.

The bitcoins that you send to someone were sent to you from someone else. When they sent them to you, the address that they sent from was registered on the bitcoin blockchain as the transaction input, and your address – the address they sent it to – was registered on the bitcoin network as the transaction output.

When you send that bitcoin on to someone else, your wallet creates a transaction output which is the address of the person to whom you’re sending the coin. That transaction will then be registered on the bitcoin network with your bitcoin address as the transaction input.

When that person then sends those bitcoins to someone else, their address will, in turn, become the transaction input, and that other person’s bitcoin address will be the transaction output.

Using this system, people can trace bitcoin transactions all the way through to when the bitcoin was first created, understanding who sent it to whom, at any point in time. This creates a completely transparent system in which all transactions can be checked at any time.

The Future for Bitcoin.

Technology has made the world a smaller place over recent years. Bitcoin is a child of the technological revolution. As the first pan-global currency (or commodity) that can be used by people all over the world as a medium of exchange without involving governments, the cryptocurrency will continue to attract interest and resistance.

In nations where currency flows are subject to stringent government control, Bitcoin offers a method to transfer wealth to regions of the world where restrictions are less onerous. Additionally, since Bitcoin transactions are anonymous, the cryptocurrency will continue to attract transactions connected to nefarious and outlawed activities.

It is clear that Bitcoin is gaining interest and use around the globe. In 2016, the majority of Bitcoin transactions occurred in China. In fact, the massive volatility in Bitcoin’s value at the beginning of 2017 that took the price from $1129 to under $800 on the same day was likely due to speculation from China. Bitcoin, and its operational child, blockchain technology, have a future in the world markets. However, it is likely that governments all over the world will resist a pan-global asset that operates beyond their reach and can facilitate activities that run counter to their laws and rules or political agenda.

Is Bitcoin a Commodity?

The CFTC’s designation came as a response to a Bitcoin exchange that was offering derivative contracts or options on the value of the cryptocurrency. However, Bitcoin is one of those assets that does not quite fit well into any definition and a historical understanding of what is a currency and what is a commodity sheds light on the argument.

Throughout the course of history, many commodities and even some manufactured products have served as currency. Probably the best examples are gold and silver. Gold and silver were not only used as a medium of exchange, or currencies for thousands of years, they were backing for many paper currencies around the world until only recently. Central banks and monetary authorities around the world continue to hold vast gold reserves and categorize their holdings as “foreign exchange reserves.” Therefore, both gold and silver can be thought of in the same class as Bitcoin.

Moreover, over the course of history salt served as a medium of exchange in ancient times. More recently, cigarettes or blue jeans have been employed as currency in certain areas of the world over recent decades. As you can see, the classification of Bitcoin as a commodity is both dubious and understandable, at the same time. It is hard categorized Bitcoin because it is so new and different from other assets available to market participants. One thing seems certain, the growth of interest in the cryptocurrency over recent years means that it is an asset that deserves our attention.

Is Bitcoin a Currency?

There is a great deal of debate about whether Bitcoin is a currency. The Merriam-Webster Dictionary defines currency as:

• Circulation as a medium of exchange
• General use, acceptance, or prevalence
• The quality or state of being present
• Something (like coins, treasury notes, and banknotes) that is in circulation as a medium of exchange
• Paper money in circulation
• A comment article used for barter
• A medium of verbal or intellectual expression

The official definition of currency may leave you more confused about whether Bitcoin is a currency or something else. After all, it certainly meets some of the characteristics in the definition, but not others.

In September 2015, the Commodity Futures Trading Commission (CFTC) in the United States officially designated Bitcoin as a commodity.

What makes Blockchain Transfers Better.

Let’s first remind everyone of the high fees charged for international currency transfers in the currently accepted currency transfer system.

Why do you think it is so expensive to make currency transfers?

Well, first of all, any of the global money transfer systems (banks, Western Union, MoneyGram) all have costs associated with maintaining a global physical presence. All those offices and the staff to man them is very expensive, and the cost is passed along to customers in various fees.

Banks also have to bear the costs of conversions. In a recent study the World Bankdetermined that a traditional money transfer for private citizens costs over 7% of the payment amount.

Cryptocurrency transfers avoid the expensive real-world movement of currencies. This provides favorable transaction costs, speed and reliability in the network’s operation. Converting these cryptocurrencies to fiat currencies will then cost roughly 1.5-2% using most third-party cryptocurrency exchanges.

That’s a savings of more than 5% of the payment amount for most transactions.

While most blockchain projects are currently working on solving this more for corporations than individuals, there are still some cryptocurrencies looking to make global transfers less expensive, or even free, for the individual.

What does FIAT mean?

Fiat money is the currency that a government has declared to be legal tender, but it is not backed by a physical commodity. The value of each country’s fiat currency is determined by the supply of the currency and the demand for it to purchase goods and services.

Fiat currencies are backed by nothing more than the credit of the economy and taxing authority of the government that issues it, as well as the faith of those who choose to use it. This poses a risk of hyperinflation, because when faith in the currency is lost it no longer holds any value.

Nearly all modern currencies are fiat currencies, having no real intrinsic value, and used entirely as a means of payment. As long as the fiat currency continues to serve as a medium of exchange, holds it value, and provides accounting it serves a useful purpose. With the rise of cryptocurrencies discussions of fiat currencies have become more prominent, as cryptocurrencies can take on all three of these roles, raising the question of the necessity of fiat currencies, which are centralized and controlled by central banks and governments.

How Cryptocurrency Transfers Work.

The phrase “payment transfer system” sounds so technical, but it’s really just a way for one individual to make a payment to another individual or entity.

Imagine you’re living overseas and want to send some of your wages back to your home country. How do you accomplish this? Why through some payment transfer system of course.

These are known as remittances, but even when you buy something online (and who doesn’t) you’re using a payment transfer system.

That’s a pretty useful system, don’t you think?

It is, but it’s also a bit cumbersome. Payment transfers in fiat currencies can take several days, you need to provide detailed contact information, and it can be quite expensive. Here are the most common issues that have been identified in traditional payment transfer systems:

Fees: Bank transfers can be extremely expensive, especially for smaller transfers. Third-party services such as Western Union and Paypal aren’t much better either.

Exchange rate: If you’re sending fiat currency to a different country there’s a very good chance that the currency you’re sending will need to be converted to the local currency. This means an exchange rate will be used to convert the currency, and most banks will quote rates that are 5-8% more expensive than interbank rates.

Time: Bank transfers can take up to several days, which is frustrating if you need access to your money right away.

Access: It’s been suggested by the marketing of banks and money transfer agents that you will always have quick access to your money, but the reality is quite different. For those in developing countries it could mean a long journey to find an office or agent where they can collect their funds.

Legalities: Some countries have legislations governing money transfers that could mean that you’re subject to taxes or other penalties.

Thankfully a better system has been developed. That is the cryptocurrency system that emerged in 2009 when Satoshi Nakamoto released Bitcoin to the world.

What is Bitcoin?

Bitcoin is a payment system introduced as open-source software in 2009 by developer Satoshi Nakamoto. The payments in the system are recorded in a public ledger using its own unit of account, which is also called bitcoin. Payments work peer-to-peer without a central repository or single administrator, which has led the US Treasury to call bitcoin a decentralized virtual currency. Although its status as a currency is disputed, media reports often refer to bitcoin as a cryptocurrency or digital currency.

Bitcoins are created as a reward for payment processing work in which users offer their computing power to verify and record payments into the public ledger. Called mining, individuals or companies engage in this activity in exchange for transaction fees and newly created bitcoins. Besides mining, bitcoins can be obtained in exchange for fiat money, products, and services. Users can send and receive bitcoins electronically for an optional transaction fee using wallet software on a personal computer, mobile device, or a web application.

Bitcoin as a form of payment for products and services has seen growth,and merchants have an incentive to accept the digital currency because fees are lower than the 2-3% typically imposed by credit card processors. The European Banking Authority has warned that bitcoin lacks consumer protections. Unlike credit cards, any fees are paid by the purchaser not the vendor. Bitcoins can be stolen and chargebacks are impossible. Commercial use of bitcoin is currently small compared to its use by speculators, which has fueled price volatility.

Bitcoin has been a subject of scrutiny amid concerns that it can be used for illegal activities. In October 2013 the US FBI shut down the Silk Road online black market and seized 144,000 bitcoins worth US$28.5 million at the time. The US is considered bitcoin-friendly compared to other governments. In China, buying bitcoins with yuan is subject to restrictions, and bitcoin exchanges are not allowed to hold bank accounts.

If you want to know more then check out the full Bitcoin Wikipedia article.

Bitcoin (BTC): Introduction to the Cryptocurrency World.

Hello fellow blockchain enthusiasts!

These are interesting times, and it’s a blessing to be here while it all happened.

Many of you are familiar with the analogy of Bitcoin and Email.

When the internet began gaining traction in the 1990s, email was the first application of internet technology, which was just a P2P network of computers and intranets back then.

So first adopters and newcomers naturally thought that Email was the Internet.

And then it blew up and grew to what it is today.

About 2 decades later, Bitcoin and blockchain technology was invented and is being hailed as the next big invention since the internet.

And we’re in a similar situation again. Most people believe that Bitcoin is the invention.

They’re wrong. Bitcoin is the first application of the invention.

Blockchain technology and the process of mining is the invention. And I’d like to agree that Satoshi’s Nakamoto’s invention in 2009 is one of the most pathbreaking inventions since the discovery of the Internet.

Tech enthusiasts, economists, business owners, and literally people in all spheres of life around the world are learning and getting to know the advantages of decentralization and blockchain technology.