What the Tech?! Blockchain Technology

We’ve made no secret about the fact we like crypto. Not just in the currency sense, but technologically speaking a lot of the stuff that underpins cryptocurrency has a far larger reach than simply trading tokens and NFT. Whilst blockchain evolution is still in its infancy, we thought that starting out what the tech with a look at blockchain technology is a good place to start. Whilst blockchain technology has evolved today, we’ll keep this article focused mainly around BTC and ETH for simplicity’s sake.
Its almost impossible to be a crypto fan without having heard of the paper where it all began. In 2008, a group or person known as “Satoshi Nakamoto” published a white paper titled “Bitcoin: A peer to peer Electronic Cash System”. Whilst the identity of Satoshi remains unknown to this day, this white paper is anything but. Its most recent leap in to the headlines was recently, when a copy of the white paper was found deep inside versions of iOS software, leading some to theorize that Satoshi was in fact Steve Jobs We don’t hold an opinion on this, but its fair to say the identity of Satoshi, will continue to be a talking point for some time to come. Timing wise, its important to note that this white paper came at an interesting time for the world’s financial system. Fiat currency and traditional banking was well in the midst of the global financial crisis at this point, so the concept of decentralized currency whilst in its infancy, had attraction given the financial sector was thick with global banks, hedge funds and other corporate entities. It’s even been suggested that the title of the white paper referenced this with the inclusion of “Peer to Peer” referencing a payment system that had no reliance on centralized authorities or intermediary’s.
In January 2009, this concept moved from a theory to beginning with the mining of what became known as the genesis block for Bitcoin. This first block, was the worlds first cryptocurrency, underpinned by a public blockchain network. This genesis block, contained the first fifty bitcoins which at the time had little intrinsic value.
How it Works
To understand the technology we must first understand some of the basic concepts of what underpins is. For us, this is advantageous as in doing so we’ll get to understand some common terminology and concepts that underpin cryptocurrencies and blockchain technology in general.
1. Mining
When we hear the concept of mining, its hard to not get a visual of dump trucks, rock and earth and other traditional mining concepts. However this isn’t the mining of old. Crypto mining is an essential part of what underpins a cryptocurrency. It allows the blockchain to remain decentralized, using computing power and cryptographic technology to create a new “block” for the chain. This block, contains the latest transaction information and is stored on chain with the previous transactions. Whilst the reward, and strategies for mining have changed over the years, evolving to keep pace with technology the concept of mining revolves around two things. Creating the new block for the chain, and rewarding miners for providing the computer power to achieve this. This reward, is usually in the form of coins and can be financially lucrative depending on market and electricity prices when the mining occurs. Whilst bitcoin in the early days was able to mine with a CPU and a moderately powerful PC, bitcoin mining today revolves around the ASIC. Standing for Application Specific Integrated Circuit, these ASIC’s provide enormous hash rates, specifically designed for mining bitcoin. If you’re able to mine a block however, the payoff is instant with the current reward for a Bitcoin block standing at 6.25.
2. Halving
In the initial white paper, its important to understand that BTC had strategies for managing inflation and limitation built in from the start. One of the easiest ways to understand this is by having a look at halving events, and understanding why and how often they occur.
Halving is important to the bitcoin concept because it is the mechanism that through which the supply of new bitcoins into the market is reduced over time. The paper referenced a fixed supply of 21 million bitcoins. At the current rate of mining and usage, this limited is expected to be reached around the year 2040. By having halving events, the supply of new coins is gradually reduced over time. This ultimately leads to a limited and inflationary supply of coins. When a halving event occurs, the reward of coins awarded to miners for finding a block is halved. This means a slowing in the production of new coins, with the expectation being that continued demand for the coins leads to an upward price, depending on demand.
Halving events occur at pre determined blocks on the network, and have occurred three times in the past. The first was in 2012, second in 2016, and last was in 2020. A halving is scheduled to occur every 210,000 blocks, meaning the next event is expected to be somewhere during 2024.
3. Decentralization & Cryptography
Now we’ve looked at how mining occurs to create new blocks, and how inflation and demand is theorized to work we can look at one of the biggest strengths behind the network — the power of decentralization and cryptography to secure it.
For this to work cryptography is vital, as it provides two things to the network. Firstly, it allows the transaction to be secure, with only the intended recipient being able to access the funds. This means centralized manipulation of the network in normal circumstances, cant occur. Secondly, when our btc transaction is added to the network, cryptography is again used to secure it when the block is developed. While explaining how the block is generated is outside the scope of this article what we can say is that block development changes over time, which is designed to keep the network stable and resistant to attacks. It also means that modifying and changing a block for nefarious purposes becomes increasingly difficult as the ledger remains stored and cryptographically secure throughout the process, meaning that a modified block that has been interfered with becomes incredibly easy to detect. Power to the People!
Its important to note however, that this process can be resource intensive in terms of computing power meaning that the process of actually mining BTC can be intensive in terms of electricity and consumption. However many miners have risen to the challenge, using renewable energy in an attempt to offset this. There’s even nation states invested in bitcoin mining with, China, Iceland, Montenegro and Georgia all having state backed mining programs at some point.
Green Energy used for mining Bitcoin
4. Non Fungible Tokens
Whilst cryptocurrency can be controversial in its own right, its fair to say NFT technology is the storm within the storm, attracting more than its fair share of criticism in regards to utility, ownership network usage and pricing. However we feel its an important component to include when looking at blockchain technology, as this technology has more reach than simply providing digital ownership of a Jpg or File. The reason for this is the NF part of the NFT. Standing for “Non fungible” these assets, whilst being able to be traded are not able to be replaced with each other and remain unique, with its own distinct value. Whilst this predominantly has been seen with digital artwork, music and other types of content, the interchangeability of this has real world use, with the potential for real estate or even vehicles to be tokenised in the future. With fractionated ownership, inbuilt commissions and increased transparency, there can be many reasons as to why we might look at tokenising something. Whilst there is no certainty that this will occur, even enabling discussion around the concept of how to move ahead with new evolution in management and finance can be a beneficial thing, providing discussion around options and alternatives to systems that currently may not work or require better solutions in providing real world results.
Fun NFT Fact:
Whilst NFT are known for their fluctuations in price, one notable NFT sale occurred in August 2021. The Degenerate Ape Academy, #7224 sold for 10,000 SOL. This was approximately 1.8 million at the time.
Significance on Humanity:
We chose Blockchain technology for our first what the tech column, because we also believe in the benefits of decentralization for society. Whilst its fair to say blockchain’s came with their own teething problems, and have in no way reached their full potential its important to continue to use this technology to find what works. In allowing cryptocurrency and blockchain tech to evolve, we’ve already seen benefits around trust in transactions, new business models and the potential to disrupt or improve existing business models. For the technology to continue to evolve it needs usage, in terms of both experimenting with the system and understanding how the technology can be improved to reach its full potential. In a world full of authoritarian governments and legacy financial systems, this can only be a good thing for the world at large. So effectively as a global community, its up to us to decide how the technology can be used and improved, and with that we come to the close of the first article. Our call to action!
Use it or lose it. It’s over to you
We’ll close this article by including a simple call to action. Use the technology, if for no other reason than to understand how it works and what the benefits can be. We understand that circumstances can vary and not everyone wants to purchase with fiat so with that, we’ll close by including a few ways that you can earn free cryptocurrency with out any out of pocket expense. This can give you an introduction into the word of crypto and blockchain tech with no financial penalty. Whilst faucets and micro tips may take time to earn, airdrops can often pay dividends, delivering tokens directly to eligible user’s wallets. Have a read, you might find some ways to get your hands on some free Satoshis.
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Reading:
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