Basics of blockchain

Blockchain technology is a complex technology based on what it can achieve while understanding the basics of blockchain will make it look extremely simple.

Sometime the definition of blockchain technology seems too simple to be true

What is blockchain technology? 

Blockchain is a coined word. It is coined from block and chain. 

It is a digital ledger that is maintained and distributed among multiple interconnected computers called nodes. 

IBM defined blockchain as a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. 

Note that both definitions of blockchain emphasized ‘ledger’ so block chain is a ledger for storing data. 

Components of blockchain

Distributed Ledger 

One of the components of blockchain technology is a digital ledger which contains all transactions. 

Peer-to-Peer network 

Peer-to-peer is a decentralized model that facilitates communication among participants without a central server or node. 

Consensus mechanism

This is a set of rules that allows participants in a peer-to-peer network to work in synchronization. 

Once the rules are satisfied, transactions get confirmed. 

Cryptography 

Cryptography is an information and communication technique for the encryption and decryption of data using mathematical formulas that allows only the receiver to decrypt the message. 

Virtual machine

A virtual machine is a computing resource that uses software instead of a physical computer to run programs. 

Virtual machines become a part of blockchain through smart contracts. 

Types of blockchain 

There are basically two types of blockchain but there are two other variations. 

Permissionless blockchain 

A permissionless blockchain also known as public blockchain is a non-restrictive distributed ledger system where anyone who has access to the Internet can become a part of the blockchain. 

Examples are bitcoin, ethereum, litecoin blockchain among others. 

Permissioned blockchain 

This is a restrictive blockchain and it is only limited to a particular group or organisation. 

Permissioned blockchain are deployed for specific purposes such as voting, supply chain management, digital identity etc. 

Examples are Corda, Multichain and hyperledger projects. 

Consortium blockchain

This is a variation of permissioned blockchain where various organizations or groups manage a blockchain network. 

For instance, banks can manage blockchain to facilitate transactions while every bank will be a node in the blockchain. 

Examples include Energy web Foundation, R3, etc. 

Hybrid blockchain

A hybrid blockchain is a combination of both permission and permissionless blockchain. 

This type of blockchain is available to the general public but information that is available to the general public is decided by a closed network within the same block chain. 

Example is dragonchain

Understanding the basics of blockchain is a prerequisite for interacting with blockchain technology.

About Kumo

Kumo, registered as Kumo Technologies Inc in Delaware, U.S. is a fiat and crypto social payment app which allows users to exchange fiat (NGN) to crypto, save and earn interest in dollar with as low as $5, utility payment such as DSTV subscription, airtime, data among others.

Kumo wallet is your all-in-one social payment app for seamless payment solutions.

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