when Bitcoin (BTC) first appeared in 2009, few people had a clear idea of what it was, let alone the waves it would generate both financially and technologically. The underlying blockchain technology was more or less a new concept, and like most new concepts was poorly understood in general. In 2018, blockchain remains a hot topic: while it is tied in many people’s minds to cryptocurrencies, it is actually a standalone concept on which cryptocurrencies can be based. This article will clarify how blockchains work and, just as importantly, where blockchain ends and technologies based on it begin.
Cryptocurrencies
First and foremost, try to think of cryptocurrencies as applications which use blockchains for storage. Equally, remember that cryptocurrencies could conceivably be based on any of the above fault tolerance approaches: Proof of Work, Proof of Stake, or PBFT although in reality all major implementations are either PoW or PoS based at the time of writing.
Crypto-Mining:
As we previously discussed, certain currencies being minable is a result of their use of Proof of Work fault tolerance. As an inducement to perform the intensive calculations required by the PoW approach, the first person to successfully generate a valid hash first which is subsequently accepted by the network is rewarded with either the transaction fees included in that block (generally the pieces of a single ‘coin’ included in a transaction after a certain number of decimal places) and/or a new coin in the currency.
Unsurprisingly, this resulted in a rush to mine these currencies and, as with anything where money is involved, a rush to develop better and faster ways of mining. In Bitcoin’s case, this resulted in the development of Application Specific Integrated Circuits (ASICs) dedicated to mining, resulting in hash rates of over 30,000,000 terahashes per second in April 2018. That’s 30 quintillion hashes per second across the whole network
To compensate for this, the Bitcoin network adjusts the difficulty rate to result in a new block being ‘mined’ every ten minutes. Keep in mind that different PoW-based currencies frequently have different target times for blocks.
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