Bitcoin is gaining popularity lately everyone from barber to trader of the stock market is talking about blockchain. Although this article is not about how to make money using Bitcoin we will talk about the underlying technology that helped Bitcoin to reach the top of its popularity and how the technology will be useful in the coming days.
Looking back into the history
In October 2008 a white paper was released by a person named Satoshi Nakamoto explaining his approach on sending money directly from the sender to the receiver without involving any financial institution. This paper gave birth to the concept – Bitcoin. Bitcoin uses some cryptographic concept as its underlying principle so the name cryptocurrency evolved. The financial transaction is the only purpose why Bitcoin was created but the researchers decided to harvest the underlying technology to build robust technology. This underlying technology was named as “Blockchain”.
A real-world analogy of blockchain
Let us assume that you live in a city that has the capacity to park 200 cars at a time. The gate of the parking space opens only when the cars move in or out. Now you may think why to park your car in this parking space because it will provide:
- Security is the prime reason, your car will be safe from thieves
- Price is another reason, as the maintenance cost of the parking space will be borne by the owner of the space.
- Centralized: as all the cars in the town are in the same building so can call it centralized.
Now lets the do some modifications to the scenario and assume that in the city there are 200 houses ad each house has two parking spaces and people decides to rent out the extra space, this way it will solve the problem if there are more than two hundred cars. Now let us analyze the situation.
- Price: they can rent out the extra space the cost of that extra space will be low compared to big parking space.
- Security: each car will be secured as they will be locked separately.
- Decentralized: compare to the above model, here the cars will be distributed all over the city hence decentralized.
The above analogy provides the simplest model to understand the technical infrastructure of the blockchain.
Parking model to technical model
The above example gives a very basic idea about the blockchain in real-world language. Now let us match the parking components to the actual technical model.
- The big multiple car parking spaces are the centralized system.
- Data and application are the cars.
- Distributed car parking is the decentralized system.
The blockchain idea is simplified to make it easy to understand for the beginners. learn more about it to know more.