In the previous chapters, we learned about the history of money, the rise of Bitcoin, and the hows and whys surrounding Bitcoin. In this chapter, we will begin our journey of an in-depth review of Bitcoin. This chapter will cover the following topics:
Now that we know what double-spending is, and how Bitcoin resolves this issue, we are ready to continue further and provide a holistic view of Bitcoin's architecture and ecosystem.
The main pillars of Bitcoin are the following fundamental technologies and concepts:
We call this framework Bitcoin's five forces.
This framework can be seen in the following diagram:
In the next five chapters, we will delve into the specifics of each of these areas and will explain how they are combined to make Bitcoin's mechanism tick. Stay tuned, as things are getting really interesting!
Finally, we got to the point where we can give a straight answer to the question, which everyone has been asking and which is central to this book—what is blockchain?
Blockchain is a decentralized database, which is distributed over a computer network, with each computer in that network storing an identical copy of the same database filesystem. In the context of financial transactions, this is also referred to as DLT because a ledger is an accounting book or a collection of financial records.
In finance, we use a ledger to record all accounting related to a specific entity. A company's bank account would have a ledger that contains many, many transactions. Every time money comes in, or goes out, a new entry would have to be registered in the ledger. In the same way, a blockchain distributed ledger keeps the same information related...
The usefulness of blockchain technology comes from its security, immutability, and transparency. All the nodes have access to the updated and verified information stored in the database simultaneously, and at all times. These features enable huge potential financial and industrial applications. Both the private and public sectors can benefit from blockchain technology. The following sections focus extensively on such applications and on the way blockchain can transform industries and businesses around the world.
Before we move on, we should mention that blockchain can be classified broadly into two main categories:
This can be seen in the following diagram:
This distinction comes down to who owns the network infrastructure. It is similar to the distinction between the internet...
In this chapter, we learned about blockchain, how it works, why it is important, and where it can be used to improve our daily lives. In the next chapter, we'll get acquainted with another of Bitcoin's five forces—cryptography.
© 2019 Packt Publishing Limited All Rights Reserved
