Cryptocurrency works similarly to the currency notes we use for transactions in the real world. We use cryptocurrency on digital platforms to make payments. You need a cryptocurrency wallet to send and receive cryptocurrencies. The innovative alternative payment method works on encrypted algorithms.
What technology makes it possible for users to use cryptocurrencies for payments? The name of the technology is Blockchain. It is a complex system to operate. Some experts can assist you in understanding the cryptocurrency world and blockchain technology.
What Is a Blockchain?
In simple terms, a blockchain is a shared database. It is a distributed ledger that provides information among various computer network nodes. The blockchain database stores and secures information electronically in a digital format. Blockchain technology ensures the fidelity and security of a data record. It also generated the trust of people without any trusted third party.
Blockchain technology has been available in the market for over three decades. They are known for providing secure and decentralized transaction records. It also has a crucial role in maintaining cryptocurrency systems like Bitcoin.
The key points of Blockchain technology:
- It is a shared database that stores information differently from a typical database.
- Blockchains store data on the blocks linked together via cryptography.
- All the data is stored on blockchain blocks in chronological order. A block is chained to the previous block after the current block is filled with data.
- All the new data comes stored in a new block.
- Blockchains are invented to store different kinds of information, but their most common use is the ledger for transactions.
- Blockchain is used as a decentralized platform in Bitcoin’s case- it allows all users to control collectively rather than a single person or group.
- The data stored on blockchains are irreversible, as decentralized blockchains are immutable.
- The Bitcoin transactions are recorded permanently, and anyone can view them.
Blockchain Types:
There are four different types of blockchains. They are as follows:
- Private Blockchain Networks
- Public Blockchain Networks
- Permissioned Blockchain Networks
- Consortium Blockchains
How Does Blockchain Technology Work?
Blockchain is a very recent technology that can potentially revolutionize the future. The popularity of Blockchain has risen in recent years. Many businesses around the world are now integrating Blockchain technology into their work. But how does Blockchain technology work? Let’s know more about the technology for more understanding.
The Following Three Different Technologies Create Blockchain:
- Cryptographic keys
- A peer-to-peer network with a shared ledger.
- A medium to store transactions and records.
Cryptography keys are a combination of two types of keys- private keys and Public keys. These keys are critical for successful transactions. Every user has a key that creates a secure digital identity reference. The digital identity reference is known as the digital signature of the users, the most critical aspect of secured Blockchain technology.
Cryptography keys allow blockchain users to perform digital interactions through the peer-to-peer network. The digital signatures are integrated with the peer-to-peer network. It helps authorities to reach a consensus on transactions and many other issues. After authorization of a deal and mathematical verification, the transaction between the two network-connected parties is successfully secured.
Advantages Of Blockchain:
- Immutability: It is impossible to erase or modify any data recorded on the blockchain database as it supports immutability. Therefore no data tampering in the network.
- Transparency: Blockchain works on decentralized algorithms; it allows every network member to view and verify any blockchain data stored in the blocks. It creates trust among the public in the network.
- Censorship: There is no censorship on Blockchain technology as no single party controls the network; all its users control it. No government can interrupt the network operation.
- Traceability: The network allows easy tracing of changes within it since it creates an irreversible audit trail.
Uses of Blockchain Technology:
Recently, blockchain technology has been used in cryptocurrency, but other fields can also benefit from it. The following fields might benefit from blockchain technology:
- For payment processing and money transfers.
- For monitoring of supply chains.
- For digital IDs.
- For data sharing.
- For copyright and royalty protection.
- For the Internet of Things network management.
- For healthcare.
Blockchain is claimed as an unhackable technology growing at an unprecedented rate. It is now powering various new concepts like shared storage, social networks, and many more.
