Blockchain technology is the backbone of Bitcoin and other cryptocurrencies. It is a distributed database that allows for secure, transparent, and tamper-proof transactions. The technology can be used for a variety of purposes beyond cryptocurrency, including record-keeping, voting, and identity verification.

For now, however, most people are only familiar with the use of blockchain technology in digital currencies. We use Bitcoin as an example below to help illustrate how it works; however, this unbiased guide aims to explain the technology itself and its possible applications without any particular focus on Bitcoin. You can check bitcoinup.io/.

What is bitcoin?

Bitcoin is an independent currency that works without third parties, like banks, who are involved in all transactions. You can imagine this as a huge decentralized database where all information about every transaction ever made is saved and cannot be changed or lost because of the strong cryptography Satoshi applied to save every transaction ever made.

What is Blockchain?

A blockchain is a type of distributed ledger that is used to record all transactions that take place on a network. The technology has been around since the 1990s, but it did not become truly popular until 2008 when Satoshi Nakamoto released the first implementation of it for Bitcoin.

Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance. Decentralised consensus has therefore been achieved with a blockchain. This makes blockchains potentially suitable for the recording of events, medical records, and other records management activities, such as identity management, transaction processing, or voting.

As mentioned above, the first blockchain implementation was for Bitcoin, but today there are hundreds of other cryptocurrencies that use blockchains as well. The technology itself can be used for more than just recording financial transactions though. Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance. Decentralised consensus has therefore been achieved with a blockchain. This makes blockchains potentially suitable for the recording of events, medical records, and other records management activities, such as identity management, transaction processing, or voting.

While blockchains can be used to record practically everything that happened in the past (and up until now), there is a special focus on financial transactions and payment systems because cryptocurrencies like Bitcoin, Ethereum, and Ripple rely on them. All these virtual currencies use a blockchain to record all transactions that have been executed since the coin was created. In fact, the cryptocurrency itself is nothing more than a balance associated with an address on a blockchain.

Understanding the Basics of Blockchain Technology

In order to understand blockchains, you first need to understand the concept of a transaction. A transaction is nothing more than an entry in a distributed ledger that says somebody has received something. For example, if Alice sends one Bitcoins to Bob, this transaction will be recorded in the blockchain (actually several times because it travels through different nodes before reaching its final destination).

Benefits of bitcoin blockchain technology

When Satoshi Nakamoto introduced bitcoin to the world in 2008 it was considered both a payment system and a digital currency, based on some novel ideas. Now we begin to see that this new invention is so much more than just another form of money: It's not even comparable to existing financial systems and may hold some great potential for the future.

Once a transaction is entered in such a ledger, it can never be erased and so this digital currency offers great advantages for both users and merchants. Some of these already known benefits are:

• Mobile payments, as everything needed to validate transactions is saved on the bitcoin network and transmitted to all participants, you don't need extra hardware like contactless cards or NFC enabled smartphones; you just need a regular smartphone that can send and receive SMS.
• Anonymity, as all your personal data is not linked to any transaction, like in traditional payment systems like Paypal, using bitcoin you become almost anonymous and transactions cannot easily be linked to real-world identities.
• Fast processing time, transactions are sent immediately and there is no need to wait for processing.
• Low transaction fees, as there are no middlemen involved, the only thing you have to pay for is the bitcoin network fee which will cost less than a cent.

Conclusion

That's why major companies like Dell computers began accepting bitcoin payments, but that's during 2014 and since then, there is a growing trend for merchants to try to accept this new form of payment.