Blockchain for Dummies: Understanding Cryptocurrency
All of the headlines nowadays about Web3, the digital economy, and cryptocurrency can leave you feeling like you need to read blockchain for dummies. As an experienced crypto ATM operator, Pelicoin Bitcoin ATM can provide you with the basics of blockchain to help you understand how blockchain technology works and how it has the potential to change many aspects of industry and day-to-day life.
When it comes to cryptocurrency, the Blockchain was conceptualized by the mysterious Satoshi Nakamoto, who is credited with creating the technology’s application for digital currency. It is a complex piece of technology that is now being used for all sorts of digital data. It even has many useful applications for big business. For now, we’ll break it down into “Blockchain for Dummies” so that it can be understood by the layperson.
Blockchain for Dummies: Defining The Tech and How It Works
If you went looking for a blockchain for dummies, “What exactly is blockchain?” is a question you may be wondering about. Blockchain is a decentralized, distributed digital ledger that records transactions in a verifiable and permanent way. Most significantly nowadays, blockchain is the underlying technology that records and verifies transactions in cryptocurrencies such as Bitcoin and Litecoin. Here's a quick explanation of how it works:
When a transaction occurs on a blockchain, it is grouped together with other transactions into a block of data. This block then gets sent to the peer-to-peer network consisting of computers known as “nodes.” The nodes validate (or “verify”) the transactions in the block and once validated, the block gets added to the blockchain. What makes a blockchain a chain is the fact that each block contains its own cryptographic hash as well as the cryptographic hash of the previous block. This linkage is where the name "blockchain" comes from. In a sense, each new block reinforces the ones before it, making it very difficult to go back and alter historical transactions. This establishes trust and transparency in the network and is why some people refer to the blockchain as “immutable.”
Theoretically, the use of blockchain technology allows digital information to be distributed but not copied, creating the backbone of what could become a new type of internet. Going back to Satoshi Nakamoto’s white paper, cryptocurrencies were the first widely adopted application of blockchain technology. However, while the blockchain distributed ledger allows transactions in cryptocurrencies like Bitcoin to occur in a decentralized way, without the need for traditional banks or other third parties, that doesn’t mean this is the only way to use this technology. Whether or not you are interested in cryptocurrency it’s important to try to understand major technological developments that have the potential to change the way we live, and blockchain technology is one of them.
Feeling Lost? Let’s Break This Down Further
Blockchain technology is one of the most revolutionary advancements of this century, but how it works is still too complicated for many to understand at a deeper level. It’s hard to explain blockchain in a sentence, but John Giordani for Forbes does a great job simplifying the technology; he defines blockchain as “a public register in which transactions between two users belonging to the same network are stored in a secure, verifiable and permanent way.” This single definition gives a general concept, but how the technology works involves a lot more detail. Fortunately, our blockchain for dummies guide can help you better understand how it works, breaking it down as the steps in a cryptocurrency transaction.
STEP 1: THE TRANSACTION REQUEST
The use of the blockchain technology begins with a transaction request, such as a person requesting to purchase an amount of a particular cryptocurrency. Somebody on the trading platform has to initiate the transaction, and then it is broadcasted to a peer-to-peer (P2P) network. That network is actually made of computers, each one called a node.
STEP 2: THE TRANSACTION IS VALIDATED
The nodes validate the transaction and the status of the user with its known algorithms. Although we’re using buying Bitcoin as an example here, this verified transaction doesn’t have to be limited to cryptocurrency. It can involve secure documents, such as contracts, financial information, or medical records.
STEP 3: THE TRANSACTION IS COMBINED WITH OTHER TRANSACTIONS
Once the verified transaction is underway, it is combined with other verified transactions in a new “block” of data, which is added to the digital ledger. This new block is then permanently added to the already existing blockchain such that it cannot be changed in any way going forward.
If you’re still scratching your head at this point, don’t worry! It’s normal to find blockchain a bit confusing, particularly when you don’t work with it on a daily basis. However, the main point here is to understand that blockchain is an advanced technology with impressive possibilities when it comes to keeping secure records of transactions. Blockchain can still be useful to you in your life even if you don’t get all of the details; afterall, you may not understand exactly how your washing machine or your car work, but you still use both of them and they make your life better. Let’s dive deeper into why blockchain is important, both in the cryptocurrency space and potentially far beyond.
Why Blockchain Matters
So we’ve broken down how blockchain transactions work, but why is this technology so great? Having even a basic knowledge from a blockchain for dummies guide is crucial in today’s world. The adoption of blockchain technology is growing and it has the potential to revolutionize businesses across the world. In businesses without blockchain, you have two different parties keeping a ledger. For example, if I buy an ice cream cone, I keep tabs on my personal spending, and the ice cream shop marks my purchase as a sale in their own ledger. Unfortunately, separate ledgers can end up different – which can be a major problem. Blockchain technology creates an irreversible ledger that both parties can access. Furthermore, there is no central location of the ledger that a hacker can access. It’s safe and provides all parties of a transaction with the same information.
Blockchain’s capabilities might even be out of this world, literally! Media outlets have reported that NASA intends to send blockchain-based “data cubes” to the moon in February 2024 for recordkeeping purposes. Whether or not this actually happens, it shows that there is an interest in the concept of blockchain as an indelible ledger beyond the cryptocurrency industry.
Why Knowing About Blockchain Is Important for Business
Blockchain has a lot of potential to revolutionize business operations and models. Its decentralized, transparent nature builds trust between parties and may serve to reduce fraud. When it comes to cryptocurrency, which can be used as a method of payment in businesses such as ecommerce, blockchain can enable secure digital payments. Another application of blockchain is smart contracts, which automatically execute agreements when conditions are satisfied. This can make the process faster and more efficient, as well as potentially boosting security. Blockchain can also be used to facilitate supply chain management. These are just some of the exciting ways that blockchain can help modern businesses to thrive.
Blockchain’s Role In The Proliferation of Cryptocurrency
There is a reason that for some people, when they think of blockchain technology they immediately think of cryptocurrency. As alluded to above, successful cryptocurrency history starts with a 2008 white paper published under the pseudonym Satoshi Nakamoto. That white paper essentially explained how blockchain technology would power a peer-to-peer, decentralized currency. As a result, the very next year, Bitcoin was born.
Blockchain and Bitcoin Mining
Blockchain is at the heart of Bitcoin mining. Bitcoin mining is the process by which new Bitcoin transactions are confirmed on the blockchain. This confirmation process is accomplished by using advanced computers to solve mathematical puzzles, for which miners can earn rewards. While these details may be top of mind for you as a cryptocurrency enthusiast and potential purchaser it is interesting to learn about the behind-the-scenes of crypto transactions and how blockchain works to ensure accurate and secure records of transactions.
Benefiting from Blockchain for Dummies: Buying Cryptocurrency from an ATM
Even if you don’t yet need to implement blockchain in your work life, or if you don’t consider yourself a tech person, you can benefit from blockchain technology in your daily life with a Pelicoin Bitcoin ATM. Cryptocurrency ATMs are like putting the process of getting involved with blockchain on easy mode, because even if you might enjoy learning how they work, you don’t have to have a deep technical understanding in order to use them.
By using a Bitcoin ATM, you can become a part of the modern economy with cryptocurrency transactions recorded with blockchain technology. It’s simple to get started. Just bring your cash, your mobile phone, and (if you have one) your digital wallet’s address or QR code.
Beyond Blockchain for Dummies: Get Started with Blockchain Today in a Smart Way
If you’re ready to start seeing the blockchain in action and want to own cryptocurrency, head over to your nearest Pelicoin ATM. Pelicoin ATMs are a convenient and fast way to buy cryptocurrency all over the Gulf South. You can learn more about cryptocurrency on our blog! Contact Pelicoin today with any questions at (504) 507-0879 or support@pelicoin.com.