This week, Tesla announced it purchased $1.5 billion of the cryptocurrency Bitcoin. The company even hinted that customers might soon have the option to pay for their cars with Bitcoin. Welcome to 2021, where nothing makes sense anymore.
Tesla’s desire to legitimize both cryptocurrency and blockchain with its Bitcoin investment has brought these technologies into the forefront of the news and has sparked a mainstream interest. However, cryptocurrency and blockchain are often confused, and they can also be challenging concepts to understand.
is the foundational technology used by various cryptocurrencies such as Bitcoin and Dogecoin.
In its simplest form, Blockchain is a database. With a traditional database, information is stored in fields, organized into rows and columns, and indexed for fast retrieval. Those fields can be things like name, address, phone number, and also pointers to “blob” data like multimedia files — videos, images, waveform audio, that sort of stuff. We call these collections of rows and columns “tables.” The structure of these tables and the relationships between them are referred to as a database schema.
Fields can be updated in traditional databases as they are changed. For example, when you use Facebook or Instagram and add new tags, mark the location, or reply to someone’s comment, you’re interacting with a traditional database.
With blockchain, data is organized in a completely different way. Information is collected in groups or blocks, and any data that follows the first block is compiled into a newly formed block added to that chain. So the information is sequential and continues to build on each other.
It’s important to note that this blockchain structure creates an irreversible data timeline when it is decentralized. Every block of data is fingerprinted with this timeline and cannot be changed; it has an exact timestamp when added to the timeline.
Most blockchain systems are decentralized — that is, the computers that process the transactions are distributed worldwide. A transaction is entered somewhere on a client computer connected to the blockchain. This transaction is then transmitted to the network of connected peer-to-peer systems — aka nodes — that collectively solve a series of equations to validate the transaction. That’s where the “crypto” aspect comes into play.
A blockchain can have as few as a dozen nodes on a network to as many as 10,000 nodes (as Bitcoin has) or, potentially, even more. Once that transaction is confirmed to be legitimate, they are then clustered into blocks. Once the blocks are created, they are chained together with the history of all the other transactions on the blockchain, and the transaction is complete.
So what is Blockchain good for besides cryptocurrency?
In summary, a blockchain-based system’s objective is to allow digital information to be recorded and distributed but not edited. This has applications in many industries. Companies are already using this technology to perform supply chain tracing of stuff like seafood.
For example, when a scallop fisher catches their haul on a fishing trawler off of Cape Cod, that catch’s location is recorded in the initial blockchain transaction. The fisher uses a grading process to record the type of scallop, takes a photograph and video, and puts the catch in cold storage. The seafood is brought to a port, processed and packaged, then shipped out to a distributor’s refrigerated warehouse. From there, boxes of scallops are…