Among the latest trends in technology that are fast changing the world as we knew it is Blockchain. While blockchain has multiple technologies and uses stemming from it, global digital currency cryptocurrency is probably the most common.

To date, there are over 5,000 cryptocurrencies. Bitcoin is the oldest and most known digital asset and everything else has been typically referred to as an altcoin. Bitcoin was invented in 2009 by a pseudonymous programmer dubbed Satoshi Nakamoto.

Rwanda has also embarked on the new technology and started unveiling blockchain-based platforms and a blockchain training school is expected to open this year.

Blockchain is a decentralized ledger of all transactions across a network. With this technology, participants can confirm transactions without any central clearing authority. Potential applications can include fund transfers, settling trades, voting, among others.

How does blockchain work?

To break the programmers language down, lets say 10 people came together in one room to make money. They all have to follow the flow of funds, and one person lets call him Mwasa decided to keep a ledger.

Mwasas colleague lets call him Jackson decided to steal Mwasas money. To hide this, he changed the entries in the ledger. Mwasa noticed that someone had interfered with his recordings. He decided to do something about it. He found a program called a Hash function that turns text in the ledger into numbers and letters.

A hash is a set of numbers and letters, produced by hash functions. Even a small change in a string creates a completely new hash.

After each entry, Mwasa inserted a hash but Jackson decided to change entries again. At night, he got to the diary, changed the record and generated a new hash.

The next day, Mwasa noticed that somebody had interfered with his entries again. He decided to complicate the record of each transaction. After each record, he inserted a hash generated from the last recorded hash. So each entry depends on the previous.

If Jackson tries to change the record, he will have to change the hash in all previous entries. But Jackson really wanted more money, and he spent the whole night counting all the hashes.

But Mwasa did not give up. He decided to add a number after each record. This number is called Nonce. A nonce is an abbreviation for number only used once. It is a number added to a hashedor encryptedledger that, when rehashed, reach the difficult level of restrictions. Nonce should be made in a way so that the generated hash ends in two zeros.

To forge records, Jackson would have to spend hours and hours choosing Nonce for each line. Not only people, not even computers can easily figure out the Nonce. Apparently Jackson failed this time and apologized to Mwasa.

Later, Mwasa realized that during the process. He had created too many records and that he couldnt keep the encrypted diary forever. So when he reached 5,000 transactions, he converted them to a one page spreadsheet and spread it to over 5,000 computers all over the world. These computers are called nodes.

Every time a transaction occurs it has to be approved by the nodes, each of whom checks its validity. Once every node has checked a transaction there is an electronic vote, some nodes may think the transaction is valid and others think it is a fraud.

Now, if Jackson change one entry, all the other computers will have the original hash. They would not allow the change to occur. This makes blockchain almost impossible to forge.

Mwasas shared spreadsheet is called a block and if more people like him shared same spreadsheets, a blockchain is born.

Once a block reaches a certain number of approved transactions then a new block is formed. The Blockchain updates itself every ten minutes. It does so automatically. No master or central computer instructs the computers to do this.

editor@newtimesrwanda.com

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Nuts and bolts: What is blockchain and how does it work? - The New Times