This is the last article of our technology series for beginners. We hope that the previous articles have helped you understand what a blockchain is, how it works, and how to use it. Here we would like to summarize what we have covered in the Technology Section for Beginners.
A blockchain is a method to store data just like you store information in lists and tables. The special method of handling data allows you to transfer value without involving a central entity.
We made the comparison of blockchain is a protocol to transfer value with the internet being a protocol that enables you to transfer information. We also compared blockchain to the post being a “protocol” to send physical goods. A protocol is just a set of rules and standards which are defined, so all participants can communicate and collaborate efficiently. The protocol is run on a large number of computers all around the world. Because the data on a blockchain is very secure and all the nodes communicate in a predefined way no middlemen are needed to ensure safe transactions with digital currencies.
Miners are the bookkeepers of a blockchain. They collectively make decisions on what happened in the past, allowing the network to reach consensus on the current state. Miners require specialized hardware and electricity to solve a computationally hard puzzle. The miners are in a competition to find the next block the fastest. In turn, they receive newly created coins if they finish the task first. This is how a decentralized cryptocurrency protocol can pay for its own maintenance.
The nodes make up the infrastructure of the network itself. Full nodes maintain a copy of the blockchain and verify all the transactions and blocks on the network. Light Nodes only store a pair of keys. Most mobile and desktop wallets are light nodes.
Your public key is like your address on the blockchain, and your private key is the password to access your address and the money within. You use your public key to receive money and your private key to authorize spending your money. As a pair, the public and private key represent your identity on a blockchain. The key pairs are part of an encryption scheme called public-key cryptography or asymmetric cryptography, which is one of the main pillars of blockchain technology.
Wallets are apps that generate and manage keys for you, show you your balance by finding all the transactions you received on the blockchain, and help create new transactions.
A transaction is a message to the network informing all participants that some money has changed hands. If you want to send a transaction, you must unlock your money with your private key first. Then you what address(es) will receive how much of your money. The transaction is basically a message saying, “Alice sent Bob 10 ZEN”. This statement is what represents Bob’s coins.
To access the information stored on a blockchain, you use a block explorer. Like how a web browser lets you access information on the internet, the block explorer lets you access information on the blockchain. You can look up addresses, transactions, or entire blocks.
While cryptocurrencies are not anonymous by default, some of them offer features that allow you to transact privately. To increase the level of privacy, you should use different addresses for every incoming transaction. This makes it harder for an adversary to track your transaction history. Most wallets will do this automatically for you. You can use cryptocurrencies with enhanced privacy features, like Horizen that offers Zero-Knowledge Proofs, to transact completely private. By using a different address type (z-Addresses) within the same wallet, your transactions become private.
Cryptocurrencies and blockchain are not an easy topic. In this line of articles, we were trying to explain it in intuitive ways without sacrificing too much accuracy. It takes a while to understand blockchain technology - there is no way around it. I read many articles multiple times until they clicked with me. You can always come back to re-read these articles. It will make a lot more sense reading it a second time with a little break in between.
If you feel comfortable about everything you have just read and would like to keep learning: there is more! Move up one level and see our Advanced articles. We have structured them the same way we did in the Beginner Level, but added more detail to all topics and split some of them up to look at the individual concepts more closely. We designed the content in a way where you can either read it from top to bottom (which we can only recommend) or jump to articles that you are especially interested in.
We hope you enjoyed this series of articles. Please let us know if there is anything that you find confusing. The content provided is and will be work in progress for a while. We are always open to suggestions and constructive feedback, so drop us a message if you want to share your thoughts with us.
Your Horizen Team