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The Block Chain Revolution

 

Background

After Bitcoin (BTC) started in the first decade of the 21st century, Block chain technology became more prominent despite its existence of about two decades by then. The growth of BTC (a block chain-based cryptocurrency) from less than a dollar to over 50k dollars in the next ten years made block chain more known to the ordinary person. This write-up aims to presents the blockchain and its further extensions in simple layman language. 

 

 Photo by Pete Linforth from Pixabay. 

 What is Block Chain? (Block Chain 1.0)

Imagine an “iron chain” that consists of several connected rings. The same way the cryptocurrency records are kept on different interconnected computers (or forming a chain) on the internet. Thousands of Bitcoin miners (the people working on these interconnected computers for maintaining BTC transactions) are trying to solve complex algorithms to create BTC. When a transaction on Bitcoin occurs, there is one ring on a chain that is added to the already existing chain. And this record is updated across all 1000s of miners’ computers. As a reward, the Bitcoin algorithm gave away some Bitcoin a bonus to these miners. Thus, the entire system works.

Meanwhile, anyone can check this chain that is kept on thousands of miner’s computer.  Thus its publicly available records. In the start, there was block chain 1.0 technology. With time, it was realised that the blockchain became slow to execute transactions as the chain got longer. Also, there were objections to the block chain that it consumes much electrical power. For this purpose, block chain 2.0 and master node based cryptocurrencies were introduced. 


Photo by xresch from Pixabay

The Block Chain 2.0

Block chain 2.0 is used for smart contracts. Imagine that there is a private limited company that has millions of shareholders. The company has a smart contract arrangement for all its shareholders. Once the company decides to share the profit with its stockholders, this will automatically execute, and all shareholders will get their share as agreed upon agreement. Or imagine a government is running some social program for its impoverished population. The government can ensure automatic execution of such cash payments targeting millions of people without any issue and almost zero financial intermediary (or bank payment costs). There could be so many other business contracts applications where the participant agrees upon some payments that need to be executed by the end of the contract.


Photo by Gerd Altmann from Pixabay.

 The Alternative to Block Chain: The Master Nodes revolution

An alternative to a block chain is the master node. In master nodes, dedicated computers work as master nodes and keep records of the transactions of a particular currency. Master node based currencies work differently than blockchain-based currencies. In this model, a computer that works as a master node is sold by a specific value (for instead of “dash currency”, a master nodes value is 1000 dash currency) of the same currency for which this master node will work. There are 1000s of people who own these master nodes. The master nodes keep the records of that specific currency. For instance, if a transaction in that particular currency occurs (e.g., in-dash currency), a notification is generated to all master nodes, and all master nodes automatically update their records. This chain string (or the ledger) is publicly available on all master nodes. And for that, master nodes are rewarded with the same currency as a reward. Thus the problem of the usage of extensive power use is addressed.

It may also be noted that when Bitcoin-based transactions become slow in past, Bitcoin is made faster after upgrading its algorithms and the underlying blockchain. It is now as quickly as other master node based cryptocurrencies.

Written by Prof. Shrewd

 

 

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