What Is Blockchain Technology? A Step by Step Guide for Beginners (Inc Statistics)

written by

Jack Foster

last updated

October 1, 2020

Share on facebook
Share on twitter
Share on linkedin
Share on pinterest
Share on email

The first real application of blockchain technology was initiated in 2009 when Bitcoin was released. Bitcoin is the currency and blockchain is the technology behind it. Cryptocurrency simply refers to digital currency that is underpinned by a blockchain.

Bitcoin was born from a person, or group of people (no one actually knows) referred to as Satoshi Nakamoto. Their identity is unknown, but their creation (Bitcoin) quickly became popular since its release in 2009. It was labelled as Bitcoin: A Peer-to-Peer Electronic Cash System.

Bitcoin Blockchain

The blockchain (technology) behind Bitcoin currency is a public ledger. It covers every transaction that has ever occurred. The beauty of blockchain is that it can’t be changed or interfered with, making it a secure option of payment.

How does it work?

We all know that traditional currency is ‘managed’ by banks. Bitcoin doesn’t have a central authority like traditional currency, which has its pros and cons. Cryptocurrency is maintained by what we know as miners.

Miners are people who run their own computers. These purpose-built computers are constantly competing to solve very complex mathematical puzzles to complete a transaction. Now, I know that sounds really confusing, but don’t worry, we’ll get there! Here’s an example:

  1. People are making Bitcoin transactions
  2. Each transaction comes from a purse/wallet with a private key
  3. This private key proves that the transaction has originated from the owner of the purse/wallet

All over the world these transactions are taking place. All of the individual transactions are bulked together into a block. The block gets released to the Bitcoin network which is made up of the purpose-built computers.

When the mathematical problems get solved, the ‘winner’ is rewarded with Bitcoin. Once the block can be validated it gets added to previous blocks, eventually creating a chain. Hence the term, blockchain.

Advantages

Decentralization: Blockchain cannot be a ‘victim’ of censorship, corruption, or tampering. It uses a peer-to-peer (P2P) network. Due to P2P, ledgers are stored across multiple locations (exceeding 35,000 nodes). So, unless you can physically track down all 35,000 of those, it cannot be destroyed.

Transparency: All transactions recorded on the blockchain are transparent. What I mean by this is that they are all publicly accessible and visible by everyone.

Security: Do you remember I mentioned about keys earlier? Blockchain technology is secure because transactions require a key. All pieces of data are encrypted and saved in blocks to be verified. Verification must take place in order to ‘unlock’ the data.

Speed/Efficiency: Because blockchain is application-based, there’s no physical data, paperwork, etc. This automatically eliminates the time it takes to store information because the technology has already done that for you. There’s also a massive reduction of human error, making the whole process much more efficient.

Cost: Blockchain doesn’t rely on intermediaries. That means there’s no middleman to manage transactions. Immediately, this eliminates any overhead costs that would have otherwise been spent on third parties.

Disadvantages

Complexity: Undoubtedly, blockchain technology is complex (hence this guide)! It’s not the type of language or industry you could just pick up and run with. But, being that it is so complex kind of makes it an advantage too.

Security flaw: When Bitcoin was launched, Satoshi Nakamoto highlighted a notable security flaw. If more than 50% of the computers working as nodes tell a lie, that lie becomes the truth. Mining pools are therefore monitored closely by the community.

Other blockchains

Blockchain technology doesn’t just refer to Bitcoin. There are plenty of other companies that use blockchain platforms, such as, Ethereum, R3, IBM, Hyperledger, etc.

Ethereum’s digital currency, or digital coin, is known as ether. It specialises in smart contracts. Ether is the second biggest cryptocurrency in the world, noted by value. The price of Ethereum for the end of September 2018 amounted to 235.39 U.S. dollars. Much like Bitcoin, Ethereum is also public.

For those who are interested in cross-border transactions, Ripple is the main blockchain for this. Moving currency from one country to another, and one currency to another, can take a long time. It’s also an expensive process that requires multiple middle-men to assist the transaction.

Ripple’s crytocurrency is known as XRP. The blockchain system associated to Ripple is known as xCurrent. The purpose of xCurrent is to cut out third parties or middle-men, reducing transactions down to seconds.

Statistics about Bitcoin

Here’s a few statistics that we know about Bitcoin:

#1 | Financial services are the biggest demographic

Bitcoin’s largest demographic is the financial services/investments services industry with 8.14% of community interests

#2 | Gender plays a big part with males

91.22% of Bitcoin users are male. Although the gender scales are more balanced within the IT industry, female users haven’t taken to Bitcoin like male users.

#3 | Majority of transactions are on desktop

76% of Bitcoin transactions are performed on desktop, compared to 20.88% on mobile. Surprising perhaps given the mobile usage market is continually on the rise.

#4 | Bitcoin index value over $6000

The Bitcoin index value for September 2018 equaled $6,604.97

#5 | The first ledger appeared 7,000 years ago

Although the economic exchange was actually human exchange, ledgers were first seen over 7000 years ago

#6 | Over 100 startup companies formed to develop blockchain solutions

100 startup companies from 45 countries partnered with UNICEF to develop blockchain solutions

#7 | Ethereum cryptocurrency is on the rise

Ethereum has 30x more miners than the next blockchain community

#8 | Cryptocurrency is mentioned every few seconds

Every 3 seconds someone on social media is posting about cryptocurrency; specifically Bitcoin

#9 | 31% of Brits won’t purchase Bitcoin

Around 31% of people in the U.K. won’t purchase Bitcoin because they believe it’s high risk

#10 | Bitcoin is the most expensive virtual currency

The most expensive virtual currency is Bitcoin. As of November 26th, 2018, Bitcoin was valued at $3,630.58

#11 | Millenials represent a large portion of Bitcoin investors

The majority of Bitcoin investors fall into the younger age bracket of 18-34 year olds

you may also like...

ibVPN Review

TurboVPN offers a free service, but is it worth your time? Read my thoughts in…
Read more

PureVPN Review

Based in Hong Kong, PureVPN has been running for over 13 years now and has…
Read more

VPN.ac Review

One name that is usually overlooked is VPN.ac. Should you be paying attention to this…
Read more

VPNArea Review

Is VPNArea a good choice? Discover more about this vPN provider, which is based in…
Read more

Secure VPN Review

SecureVPN boasts a kill switch and supports torrenting. Discover more about this VPN solution.
Read more

Hide My IP Review

Hide My IP has servers in 123 different countries around the world. Discover whether this…
Read more

FrootVPN Review

If you are looking for a low-cost, basic VPN, FrootVPN is certainly worth considering. Find…
Read more

BTGuard Review

Boasting high levels of security, BTGuard is a VPN well worth considering, but is it…
Read more

Browsec Review

From security to speed; discover everything you need to know about Browsec VPN.
Read more

Avira Review

Known for their antivirus product, Avira brought a VPN out in 2016. Read my full…
Read more

vpn.ht Review

Vpn.ht was created back in 2014 by the company known as Wicked Technology. is it…
Read more

VPN.S Review

VPN.S, also known as VPNSecure, is a solution worth considering if you are looking for…
Read more

SaferVPN Review

SaferVPN describes itself as the fastest and simplest VPN on the market. Bold claims! Does…
Read more

IVPN Review

Incorporated in Gibraltar, IVPN has a small server network. However, it comes with some great…
Read more

Proton VPN Review

ProtonVPN is based in the friendly jurisdiction of Switzerland. A great start, but does the…
Read more

PrivateVPN Review

PrivateVPN is a user-friendly VPN that is good for streaming purposes and combines effective encryption…
Read more

Tiger VPN Review

Based in Slovakia, TigerVPN has more than 300 servers across 42 countries. Is it right…
Read more

Ivacy Review

Ivacy has been around for quite some time now, and it certainly offers some great…
Read more

OpenVPN Review

OpenVPN is an open-source software application that many VPN providers use today. Discover more.
Read more

TorGuard Review

TorGuard is based in the United States, but can we get passed this poor jurisdiction?…
Read more

Buffered Review

Buffered VPN was recently absorbed into encrypt.me. From speeds to security, I assess this VPN…
Read more

HIDE me Review

Hide.me is a VPN that ticks a lot of boxes, especially in terms of streaming.…
Read more

AVG Review

AVG is a brand that is known around the world for its antivirus product, and…
Read more

AirVPN Review

KeepSolid offers robust VPN services for both the business and also the individual user. Delivering…
Read more

AceVPN Review

Acevpn has servers across more than 50 locations worldwide, but is it worth downloading?
Read more

ZenMate Review

ZenMate is a German VPN provider that will allow you to safely browse the internet…
Read more

IPVanish Review

IPVanish boasts an impressive line up of over 1000 servers across 60 countries. They’re by…
Read more

VyprVPN Review

A solid VPN that offers insanely good security and anonymity. From only £3.63 per month,…
Read more

NordVPN Review

NordVPN is a Panama-based VPN allowing you to connect to 4,952 servers worldwide. It’s well…
Read more