For my first article, I thought I should begin with an area which would have helped me when I first came into contact with this space. The Blockchain space has layers and layers of information and as the space grows, the information follows.
This article will offer an introduction into the Blockchain space and breakdown areas which I used as a foundation for my knowledge. I will attempt to keep it as simple as possible.
What is Blockchain?
Before I go straight into answering this primary question, let us look at DLT (Distributed LEDGER Technology). A DLT is a digital system used to record transaction of assets. Here, transactions and details are recorded in several places at the same time. For those that do not know, a ledger is simply a record of transactions and/or similar data. The transition of a ledger to its next came when ledgers became digitalised through the invention of the computer. What we have achieved now is that instead of authorities like banks authorising transactions recorded in ledgers, we now have cryptography (a method of protecting information) with algorithms and enhanced computing power. With this, we can now use this digital form of record keeping to create a future with future possibilities, save money and time, streamline supply chains, freedom, extremely fast transactions and cutting out the middle man (authorities like banks).
Now we can discuss Blockchain. Blockchain is the most common type of DLT technology because of its functionality. Now we have broken down where Blockchain sits, we can describe its functionality to help understand what exactly a Blockchain does and why it falls under this category. Blockchain can be defined through 5 steps:
1. Transaction. A transaction takes place between two entities. Here, there is an exchange of value between the two and this can be a digital asset like a digital currency (such as Bitcoin, Etherium, XRP etc.) or a digital asset (a document like a CV, a degree certificate, ID certificate).
2. Block. The transaction we just explained above is now coupled into a block with other pending transactions thus creating ... a 'Block'! The block is sent to the blockchains systems network (it can vary depending on the choice of system/asset).
3. Verify. We all need to share the same value of what is true and how trust is shared. What rules decide what is true and what is false. The verification process is done through various methods, however, the overview in simple terms is the computers on the network evaluate and verify the transactions and decide whether they are valid. Once, the consensus is complete and rules are met, the transaction is verified. There is clear transparency and the systems used are created in such an open way, they are difficult to manipulate.
4. Hash. The part where things come together. The blocks that are verified are stamped with a cryptographic hash which in turn creates a chain of records. The records are completed in such a way, that for them to be tampered with is close to impossible.
5. Execute. The last and final part is the movement of the unit of value from A to B.
So now we have the simpler aspect explained. We can move to the next aspect.
Smart Contracts. Where exactly does that fit into this?
Let us say we need to ensure an agreement between two parties is met. Party A is selling a house to Party B. We have a set of conditions that would allow the the transaction to take place. Here, a smart contract is where the execution of if the conditions are met, then the next steps can be taken. If you are familiar with code, the If-Then principle is what the Smart Contract works upon. Now, a deeper dive into Smart Contracts. In the world of Blockchain, the smart contract is a piece of code that facilitates the transaction of an assets, property, unit of value and IF the conditions are met, the completion of the transaction can take place. We have transparency and especially in times when we are dealing with people who we do not know or trust, the confirmation by users on the network and the use of a Smart Contract can allow a seamless, verified and recorded transaction.
Smart Contracts can be broken down into 3 main areas:
1. Signatures - Parties that are communicating and exchanging have agreed upon the transaction through the use of a digital signature.
2. Subject - The subject of the agreement needs to be well defined and related only within the Smart Contract.
3. T&C - The T&C needs to be addressed and defined and agreed upon. In a Smart Contract, they need to be defined within the code in a mathematical manner and the rules needs to be set as well as the end goal and in the case of a condition not being met - the result of this.
There will be more blog posts to come and a lot of projects and tutorials I would like to provide. I will look to review projects and anything that I think investors, new learners and Crypto enthusiasts can benefit from.
