Bitcoins and blockchains

Choate Rosemary Hall 10TH
Jeong Min Si

Some may be familiar with blockchain, the foundation of the cryptocurrency technology. Blockchain is a distributed database that stores a growing list of transaction records. These records are characterized its resistance against tampering. Blockchain was initially developed solely to support the bitcoin system. Linking on top of another, blockchains stores the previous transactions of bitcoins from one user to another. Now, blockchains is finding its use outside of the limited boundaries of bitcoin with its various advantages.

Blockchains are divided into two types of records, transactions and blocks. A transaction is created when one use sends cryptocurrency to another. For the system to define a transaction to be valid, the amount sent must be less than the amount owned by the sender, and the transaction must be digitally signed, a digital version of signing on paper. Blocks are used to record and confirm transactions made, and are linked in the block chain. Blocks are a finite resource and must be mined using programs or softwares.Miners of these blocks are rewarded for their work by a built-in fixed cryptocurrency or fees for confirming transactions made by that block. In the bitcoin market, the current reward for successfully mining a block is 25 bitcoins, equivalent to 11750 US dollars.

There are various advantages of the blockchain technology. Chains of transactions could be input in the database from different users, allowing independent records to give feedback on a user’s transaction. Because the blockchain is well linked, verification errors of transactions such as a single cryptocurrency being spent twice or at two different places does not occur within the system through the validation process. Because a change in a block could be seen by all users within the network, altering data is not possible either. As a whole, blockchains provided a standardized medium for cryptocurrencies to be traded directly between users.

Blockchains is a fairly new technology that has already proved its potential through its widespread use of bitcoins. Seeing the promising future of the blockchain technology, Big companies such as J.P. Morgan have announced to aggressively invest in the it, dedicating a big portion of their 9 billion dollar investment. Maybe in the near future, we will live in a world where even new innovations such as credit cards and mobile pay is replaced by a well built system of cryptocurrency backboned by blockchains.

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