By Richard Arneson
Think back to that Accounting 101 class you took in college. As an English major, I found the class to be miles on the other side difficult. I thought I’d accidentally signed up for the CPA prep course. But the first thing you learn is (let’s all say it together) Debits to the left, credits to the right. What you add or subtract from one side, you do the opposite to the other. Add in a credit, and subtract that amount from debits, and vice versa. And with that, a ledger has just been described, which is exactly what Blockchain is. Blockchain’s first and most widely publicized product is Bitcoin, a cryptocurrency that makes a ledger available to anyone, whether they’re involved in a transaction or not. However, this public ledger doesn’t disclose parties involved in any of the transactions.
Blockchain was created in the late 1990’s and is a comprehensive listing of records linked, or chained, together. Bitcoin runs on the Blockchain platform and blends together the worlds of technology and finance. It was created in 2008 by Satoshi Nakamoto, a pseudonym for either a person or group of people―nobody’s quite sure which. Bitcoin has been one of the most talked about topics in years for two (2) reasons:
- Tremendous gains for investors trading (as in buy low, sell high trading) in Bitcoin have been widely reported, even though news about the hefty transaction fees administered by Bitcoin exchanges have been reserved for the back page.
- Bitcoin has been the primary currency demanded by those who launch ransomware due to the erroneous belief that they’re untraceable. They can be, but I’ll share that for a future blog.
In Blockchain, including Bitcoin, of course, those spaces in which you enter debits or credits are called―appropriately―blocks. And those blocks are chained together (name make sense now?). Each block contains a user’s unique identifier and information about both the transaction and the block that precedes it. Each block further strengthens the chain by verifying the previous block. The more blocks, the more times the chain gets verified. And because Bitcoin, like Blockchain, is a distributed ledger and not a database, it can’t be altered or accessed.
How are Bitcoin transactions conducted?
Each Bitcoin user has an account, known as a Bitcoin wallet, in which their Bitcoin balance and information about all their transactions is maintained. If a user needs to send Bitcoin to another user, they publish their intent to do so, after which Bitcoin nodes receive the information and verify that the sender has enough money in their wallet and hasn’t already sent it to somebody else. Once that’s completed, a block is created that includes the sender’s identifier, information about the transaction, including the recipient’s unique identifier, and the preceding block in the chain.
Bitcoin uses Blockchain, but Blockchain is more than just cryptocurrency
Bitcoin and Blockchain are mistakenly used interchangeably. Blockchain is a platform utilized by Bitcoin. In fact, Bitcoin is only one (1) of hundreds of applications that utilize Blockchain. While the word ledger brings to mind numbers, Blockchain can provide a ledger, of sorts, for other things, including contracts, land registries, medical records, music rights for privacy prevention, and many, many more.
Oh, and about those photos…
Blockchain is a fairly straightforward technology, but, in the case of Bitcoin, those stock photographs of shiny gold Bitcoins posted in just about every article you’ve seen on the subject have only added to any confusion. Remember, Bitcoin is virtual currency and utilizes cryptography to secure and verify transactions. No, there are no physical, tangible Bitcoins. You can’t stuff them in your pocket, lose them between sofa cushions or find them at the bottom of your clothes dryer.
If you’re still in need of a visual, this might help—Click Here to watch real live Bitcoin transactions. Whether you consider this fun is up for interpretation, but if you need the same info and with a more appealing, albeit less detailed, format, you can find it at bitbonkers.com.
Questions? Turn to the Experts
GDT is a 22-year-old network and systems integrator that employs some of the most talented and tenured solutions architects and engineers in the industry. They design, build and deploy a wide array of solutions, including managed services, managed security services and professional services. They operate out of GDT’s 24x7x365 Network Operations Center (NOC) and Security Operations Center (SOC) and oversee the networks and network security for some of the most notable enterprises, service providers and government agencies in the world. You can contact them at SolutionsArchitects@gdt.com or at Engineering@gdt.com. They’d love to hear from you.
And for more great information about Blockchain and Bitcoin, watch GDT Network Engineer Ryan Rogers conduct a great Lunch ‘n’ Learn presentation on both here.