It’s hard to find a tech blog, online site, or magazine that doesn’t hype blockchain as the next big thing, but many people seem to recognize the word without really understanding the concept. Understanding blockchain as a technology and how it’s related to each cryptocurrency is fundamental to becoming part of the cryptocurrency future. Beyond “just” cryptocurrencies, understanding blockchain’s implications for other industries will help make it clear why blockchain is a truly revolutionary approach to transaction tracking, metadata storage, lookups and data security.
What is a Blockchain?
A blockchain is shared distributed data that functions as a ledger, tracking certain type of transactions. There is no such thing as the blockchain. Each application of the blockchain concept, such as a cryptocurrency, uses a blockchain to record the type of transactions that it is associated with, though multiple applications can share a single blockchain. Bitcoin (BTC) was the first cryptocurrency, and is the original example of a blockchain-based technology. Anyone who is mining Bitcoin is interacting with Bitcoinsblockchain, which is completely distinct from the blockchain used by Ethereum (ETH), the blockchain used by Monero (XMR) and so on.
Every participant in a blockchain has a complete copy of that blockchain. Every time a transaction is completed, all members of the associated blockchain network get information about those changes and ensure that they are present in their copy.
How does Blockchain work as a technology?
As the name suggests, a blockchain is composed of data blocks of a certain size that are linked together. Each block is comprised of a header and the data that the block contains. The header in each block in a blockchain has a reference to the previous block in the chain. The identifier used to identify the previous block is the fingerprint of the header of that block, known as a hash. In mathematics, a hash function is a mathematical process that takes input data of any size, performs some mathematical operations on that data, and returns a value that is a fixed size. The term “hash” comes from the notion that you are somehow chopping up differently-sized input data to arrive at the fixed-size output value.
Using a hash as the identifier for the previous block has a big advantage over just using an increasing block identifier for each block. Change one bit in the data, and a different hash is returned. Thus, using a hash as a block identifier provides both a unique way of identifying a block and a way of verifying the fact that the data in that block has not changed.
The block headers of different blockchains have different formats, and the content and sizes of its blocks also differ. Bitcoin’s header format is 80 bytes, while the header for the blockchain used by Ethereum (ETH) is over 500 bytes. The key features of any blockchain header are the following:
- Prev-block link – the hash value that identifies the previous block in the blockchain;
- Block size – size of this block in bytes;
- Nonce – one or more values that verify that appropriate work went into creating the block.
Block headers differ by more than size across different blockchains – their contents differ based on the types of transactions that they are tracking and the way in which they are being tracked. Because headers differ across blockchains, block contents also differ widely across different blockchains. Each transaction and related block contents must at least contain a unique identifier for that transaction, which is typically a hash based on the contents of the transaction.
As the blocks in a blockchain contain a record of all transactions that have ever been made to that blockchain, blockchains can only be appended to as new transactions occur.
Building and Adding to a Blockchain
Blocks in a blockchain are created by an operation known as “mining”. Systems that are involved in the blockchain, known as nodes, create new blocks by performing many calculations in order to find hash values that satisfy the criteria for the “nonce” field in the block header. The nonce is therefore referred to as “proof of work” (PoW) in blockchains such as Bitcoin (BTC). Other blockchains use different criteria for validating a block, such as “proof of stake” (PoS), “proof of activity” (PoA), and so on. When you successfully mine a block in a public blockchain such as that for a cryptocurrency, you receive a reward, typically in units of that cryptocurrency.
What are Pools?
The computing power required to mine blocks in a blockchain that associated with a cryptocurrency is very large. When mining blocks in a specific blockchain, you are racing against every other miner of that blockchain for completing a block, submitting it to the blockchain, and receiving a reward. This led to the creation of collaborative sites known as “mining pools”, where many miners work together to solve the nonce requirements and share in the results when mining a block is successful.
MinerGate provides a unique and powerful approach to mining pools. As each cryptocurrency has its own blockchain, it can be a pain to track down how and where one can mine each cryptocurrency. MinerGate therefore supports multiple pools, a separate one for many of the most popular cryptocurrencies, and therefore delivers a one-stop-shopping solution for modern miners. When mining, MinerGate‘s pools for different currencies differ by the hostname and network address at which you point your mining software.
MinerGate’s multiple pool approach provides several other advantages for the serious miner. If you are mining multiple cryptocurrencies, supporting a pool for each makes it easy for MinerGate users to switch between them, converting from one to another as your interests or focus changes. Similarly, MinerGate’s multiple pools make it each for MinerGate users to get started by reducing local storage and synchronization time, because each pool maintains a single copy of the associated blockchain, rather than each miner’s system.
Blockchain technology is increasing in popularity because it eliminates many of the traditional problems associated with applications that require access to a single, centralized resource for tracking transactions and status. Each cryptocurrency uses its own blockchain to track the types of transactions that it’s is associated with. Mining pools help large numbers of miners work collaboratively and efficiently. MinerGate‘s support of multiple pools helps even larger numbers of miners work side-by-side and together for shared successes.