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Today's winner:Blockchain A-Z: Everything You Need to Know About the Game-Changing Tech Beneath Bitcoin
Blockchain A-Z: Everything You Need to Know About the Game-Changing Tech Beneath Bitcoin Blockchain is revolutionary but extremely complex. We break down the tech, ecosystem, and lore around this innovative distributed data structure—from cryptocurrency and smart contracts to Satoshi Nakamoto. Bitcoin, Dogecoin, Litecoin, and the hundreds of cryptocurrencies out there comprise billions of dollars in fluctuating wealth—none of which would exist in that digital form without blockchain. At its most fundamental level, a blockchain is a string of securely linked data blocks serving as a time-stamped digital history of, well, pretty much anything. In an era where the fluid nature of the internet can be used to alter and rewrite even the most obscure of facts, blockchain meticulously documents every transaction and distributes that cryptographic data across decentralized nodes. Originally introduced in 2008 by mysterious Bitcoin creator Satoshi Nakamoto, the underlying structure of blockchain technology extends far beyond just cryptocurrency. From contracts and financial ledgers to monitoring and securing all manner of data and the next generation of distributed applications, the distributed database and digital transaction technology is already starting to show up in all sorts of places. But before businesses, developers, and curious technologists can do anything with blockchain, they need to know what it is, how it works, and all of the different factors and players affecting where it goes next. To help make sense of this extremely complicated yet vitally important concept, we've put together an A-Z list of everything you need to know about blockchain. A: Apps and APIs The power of blockchain is in applying it to any kind of transactional data, and one of the easiest ways to do that is through application programming interfaces (APIs). APIs such as Blockchain Wallet and Chain allow developers to integrate distributed data infrastructure into apps, new forms of cryptocurrency and payments, or entire blockchain-based platforms. The most prominent example of that is Ethereum, a blockchain app platform with its own integrated development environment (IDE) that lets you build custom cryptocurrencies and smart contract-based apps (detailed further down this list). Etherium is also its own cryptocurrency and the only one (aside from Bitcoin) with a current market cap of more than $1 billion. B: Bitcoin Bitcoin uses blockchain as its distributed peer-to-peer (P2P) transaction ledger. Bitcoin users or "miners" (explained further down this list) create new blocks, each of which contain data batches of various timestamped Bitcoin transactions. Whenever any amount of cryptocurrency changes hands, a transaction occurs and is then authenticated across a distributed network of blocks. This is where any user can view the entire transaction history, but the decentralized structure and cryptographic data prevents any tampering or any way to track that transaction to its source. The current world market value of all Bitcoin currency is more than $8 billion. C: Craig Steven Wright The biggest mystery behind Bitcoin and blockchain is who authored the infamous 2008 white paper, the true identity behind the pseudonym Satoshi Nakamoto. At first the world thought it might be this guy and, most recently, the wild goose chase has focused on an Australian coder and entrepreneur named Craig Steven Wright, though there's still plenty of speculation as to whether Wright's the real deal or an elaborate con artist (especially since he's declined to prove it). It would seem the search for the father of blockchain continues but, in the meantime, it makes for some great tech lore. D: Decentralized/Distributed The distributed nature of blockchain data is one of its most attractive qualities. There's no centralized location, no single server to be hacked. Instead, blockchains are hosted on a worldwide network of miners' computers and copied on each node (see below) in the network. In the case of Bitcoin, this also means each item of cryptocurrency has a tracking number that feeds back into the blockchain transaction ledger but anonymizes any owner data. This is also the reason cryptocurrency is so popular for illegal transactions, exemplified by the online black marketplace Silk Road (and subsequent Silk Road 2.0) run by Ross "Dread Pirate Roberts" Ulbricht, who was sentenced to life in prison last year. E: Enterprise Players Blockchain is beginning to make serious noise in the enterprise software market, with companies such as IBM and Microsoft leveraging Ethereum in developer environments such as Visual Studio, Microsoft Azure and other cloud platforms, Internet of Things (IoT) technology, and more. Ethereum's blockchain app platform has largely been the gateway, but tech giants are now firmly in the blockchain business. The collective banking and finance industry is also embracing blockchain transactions in the form of smart contracts (explained in more detail further down this list). F: Free Market Aside from the tech giants accepting cryptocurrency and experimenting with blockchain, the technology is evolving quite a bit at the hands of start-ups shaping a thriving blockchain market. There's a long list of blockchain start-ups on Angel List, and the types of businesses leveraging the technology range from financial technology (FinTech) start-ups such as SETL to MIT start-up Enigma, and companies such as Slock.it that bring blockchain technology to connected cars, homes, and the sharing economy. G: Genesis BlockThe first block in a block chain. It's the only block in a chain that doesn't reference a previous one, and is generally assigned either number 0 or 1. The genesis block is also a key part of Satoshi Nakamoto lore, with the first-ever block mined on January 3, 2009. The genesis block is part of an initial stockpile of Bitcoin that has never been touched—rumored to be owned by the real Nakamoto—and currently valued at more than half a billion dollars. It's the pot of gold at the end of the rainbow. H: Hashes The piece of code that link one block to another. Hashes are a key mining tool. Hash value is used to verify transactions and as the timestamped links in the chain. Hashes are also used as the basis of creating colored coins around real-world assets and in building smart contracts. I: Intellectual Property One use case for blockchains are in securing digital assets and intellectual property (IP) that currently sit at the mercy of the internet. It's another area in which smart contracts come into play, particularly around digital multimedia files such as movies and music. In theory, artists, studios, and content providers believe blockchain could be the answer to piracy. This kind of IP protection could also extend to the use of copyrighted code and software, or something as trivial and commonplace as sharing Netflix passwords or grabbing an image off of Google that's not labeled for reuse. J: Jumping-Off Point The applications for blockchain are boundless. There are schools using blockchain to record and verify student credentials. Firms such as Deloitte are talking about using blockchain for tax collection. Congressional representatives have been given blockchain briefings. Even the US Postal Service (USPS) published a report on possibly adopting blockchain in its operations. Blockchain is still in its relative infancy, but a decade from now, there's no telling where you might find it. K: Keys Hashes are the code linking one block to another, but blockchains and cryptocurrencies wouldn't work without keys. There are public and private keys but, for the purposes of something such as Bitcoin, private key codes are vital. Every Bitcoin address is matched to a private key saved in the wallet file of the Bitcoin owner's balance. Keys are the passwords of blockchains, except there's no "forgot your password" button. Most cryptocurrency owners keep backup data because, if you forget or lose your key, anyone with your private key information can spend your Bitcoins. L: Ledger The primary function of blockchain. The cryptography and distributed transaction data keeps the ledger secure and tamper-free, making blockchains the definitive way to record every type of digital transaction for accuracy and posterity. What started as the real-time public ledger of every Bitcoin transaction that's ever occurred has become a plug-and-play ledger technology. One of the most prominent examples is R3, a start-up that has developed a financial-grade blockchain ledger with a global consortium of more than 40 global financial companies, including Barclays, Credit Suisse, Deustche Bank, Goldman Sachs, Morgan Stanley, J.P. Morgan Chase, and many others. This all feeds into the notion of blockchain as the so-called Internet of Finance. M: Mining At last, we come to the miners down in the Bitcoin trenches. Miners have a complicated job. They continually code hashes, which are then used to bundle batches of transactions and build blocks. For each successfully created block, miners earn their own cryptocurrency through both transaction fees and new coins created within the blocks. Think of it like a gold rush where the panhandlers in the stream and miners hacking away at rock walls with pickaxes are actually creating their own gold. N: Nodes Nodes are the cogs running the distributed engine underlying blockchain architecture. Blockchain transactions pass from node to node, being copied and validated along the way to ensure decentralized redundancy and verification. Using the Bitcoin network as an example, every node in a system has a copy of the blockchain, which they can broadcast to other nodes. The nodes are the backbone of blockchain's decentralized security model and, in terms of cryptocurrency, they also ensure a Bitcoin isn't spent twice. O: Open Source Open source is the reason anyone with the means and skills can create a cryptocurrency or build a blockchain. There's plenty of blockchain code on GitHub, and the open-source nature of blockchain has also led to some new types of blockchains such as parallel blocks and sidechains. R3 uses parallel blockchains in banks to trade multiple assets at once, and an innovation called pegged sidechains allow cryptocurrency and other ledger-based assets to be transferred between multiple blockchains incorporating independent assets. Finally, there are open-source initiatives experimenting with new blockchain implementations and structure. Aside from consortiums such as R3, The Linux Foundation runs the open-source Hyperledger Project (announced as the Open Ledger Project in late 2015), including members such as Cisco, IBM, Intel, and banks such as J.P. Morgan Chase and Wells Fargo. The Hyperledger Project is a collaborative effort to create a cross-industry open standard, framework, and developer tools for distributed blockchain ledgers. P: Protocol Evolution Blockchain is the result of the natural evolution of internet protocols. Check out this feature in WIRED that explains the story of how the original 1974 TCP/IP internet network protocol and Tim Berners-Lee's Hyper Text Transfer Protocol (HTTP) evolved in the same way as blockchain is evolving for the next generation of the internet, bundling multiple protocols together to form the foundation of future frameworks and "watching the birth of the internet all over again." Q: Quandary Okay, this one's a bit of a reach but I needed something for "Q." Blockchain has been beset by controversy from the get-go, from the ongoing saga of Satoshi Nakamoto to the technology's inextricable link with Bitcoin and all of the murky legality that goes with it. Blockchain enables the untraceable nature of illegal cryptocurrency transactions and has even been used to cloak infamous ransomware scams such as CryptoLocker. So, as the technology is adopted in more and more industries and use cases, the questions of accountability and ramifications need to be addressed. We're already starting to see these kinds of efforts. Take the Blockchain Alliance, a non-profit organization founded by Bitcoin advocacy groups to serve as a "public-private forum to help combat criminal activity on the blockchain." Members include major cryptocurrency players such as CoinBase, the MIT Media Lab's Digital Currency Initiative, and, of course, the Blockchain organization itself. R: Revolution A good place to start if you're looking for more information on the disruptive nature of blockchain technology is Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World, a book by tech industry veteran Don Tapscott and his son Alex. The Tapscotts talked more about how blockchains are transforming financial services, the sharing economy, manufacturing, enterprise collaboration, and beyond in Harvard Business Review. S: Smart Contracts At last, we come to smart contracts. As PCMag Editor Juan Martinez puts it in his smart contracts explainer, the rule-based transaction structure of blockchain ledgers has given rise to smart contracts and the programmable economy. Using sensors, code, and predetermined deal workflows, smart contracts, Martinez explains, can cut out the middleman in digital transactions. Smart contracts have applications in IP and digital rights management, manufacturing and delivery of physical goods, networking and data transfer, and even 3D printing. Smart contracts are also a key part of why banks and financial institutions are attracted to blockchain. They're heavily used by the R3 consortium and by Ethereum for different applications, and Ethereum has even developed its own Turing-complete programming language called Solidity to code smart contracts. T: Transaction Database From a purely technological perspective, blockchains are transaction databases. The hashes, keys, and nodes all make up a distributed database that eschews centralized storage. U: Ubiquity Blockchains are everywhere; at this point in the alphabet that's not news. The open-source code, universally applicable architecture of blockchains, and their ability to distribute, anonymize, protect, and keep a perfectly accurate record of web transactions makes the technology a given. The future of blockchains is a near-complete ubiquity beneath the surface, woven into the inner workings of how the internet will function. V: Verification Blockchains wouldn't work as ledgers without verification. Much of this falls on miners, whose block creation software verifies hashes of transactions when bundling them into blocks. In cryptocurrency and banking scenarios, payment verification is also paramount. This verification happens through node communication in the distributed network, cross-checking a Bitcoin transaction against each node's blockchain data before sending it through. W: Watchdogs How quickly blockchains develop and see adoption in major world markets will largely fall on government oversight and regulation. The European Union's (EU) markets watchdog—the European Securities and Markets Authority (ESMA)—recently announced it's going to take a closer look at blockchain technology. The EU watchdog is a prime example of world-governing bodies conducting a careful examination of the financial and technological risks associated with distributed ledgers. The EU won't be the last government to take a long, hard look at blockchains before giving the green light for sanctioned use. X: XRP Also known as Ripple, XRP is a global payments network built on blockchain that's marketed at international banks. XRP itself is the native currency organizations can use to represent flat currency, cryptocurrency, commodities, or any other unit of value. Ripple is one of the oldest examples of open payment protocols using blockchain, but there's a laundry list of companies with different APIs, platforms, and distributed payments networks. Deloitte's Banking Industry Outlook recently released a report estimating that blockchain-based payment systems could equal the volume of the United States' Automated Clearing House (ACH) financial transactions network by 2020. Y: Yield Curve Yield curves are a financial method of plotting interest rates of differing maturity. For the purposes of blockchain, I'm talking about yield curves because there are more and more banks and financial firms, payments providers, and countries looking at and adopting blockchain. Companies around the world, from the US and Mexico to Africa, Singapore, and Hong Kong, are all pushing blockchain for money transfer and payments. Plus, lawmakers in the Philippines have been pushing for years to create an "e-peso" as an official electronic tender. Blockchain is taking hold in many corners of the world, but we'll see a wide curve of maturity in how quickly and completely the implementations see approval and adoption. Z: Z System IBM is openly committed to advancing blockchain technology on many fronts, but the company has even gone as far as offering a Blockchain-as-a-Service (BaaS) platform for developers on the IBM Cloud, and integrating blockchain-based apps (created through the Hyperledger Project) on IBM z Systems. IBM even plans to leverage blockchains combined with Watson on the Watson IoT platform to make it possible for information from devices such as RFID-based locations, barcode-scan events, or device-reported data to be used with IBM's Blockchain and sync with distributed ledgers and smart contracts. It's a brave new blockchain-based world. Apple Confirms it Uses Google Cloud for iCloud Citrix Wants to Make it Easier for Docs to Access E-Health Records Potchain 1.0: Why the Legal Weed Industry Is Embracing Blockchain