In recent years, cryptocurrencies have hit the headlines, and it is hard to find someone who is not aware of them. However, people just read about bitcoins in the news without understanding what they really are and the technology behind them. Cryptocurrencies operate under a technology called blockchain, and this article will try to explain the various aspects of this technology while explaining how it works. While blockchain technology might be complicated, do not be discouraged as we will break it down into simple terms so that people who are not tech savvy can still get an idea of how it works.
Before we get into the explanation, let us begin by highlighting an example. Consider a unique Google file that is used by many computers all over the world, and they can access it through the web. Every instant an activity happens on the file, it is recorded in a row on a sheet. Every internet user in the world can access the file and view or add an activity to the sheet but no one can change the information that is already recorded. This is what blockchain technology is all about.
Blockchain contains blocks that are similar to the rows on the sheet. A block is essentially a cluster of data, and different parts of this data are connected to another block in an organized way. This series of blocks put together makes a chain of blocks thus the name blockchain. In a nutshell, blockchain can be explained as a global database where any user can access and use. It is based on the web, and thus it is not centralized in one place but in various computers all over the world. One of the significant applications of blockchain is Bitcoin, and that will be explained below.
Bitcoin is a form of virtual currency that operates using the blockchain technology. It is decentralized, and this allows users to exchange money without the intervention of a third-party entity. All the transactions in this network are logged on the “sheet” and made available to everyone to ascertain their authenticity and avoid cases of fraud. Unlike traditional currencies, you can send and receive this money from anywhere without the intervention of governments and banks. The network and transactions are all secured through a series of nodes that can verify the legitimacy of any payment. The rise and its upsurge in value is a clear indication of the importance of blockchain technology and how it can have various applications.
These are common things that you will come across when dealing with cryptocurrency. They help to enhance security within the network.
This is a string of numbers and letters, and it appears in various parts of the network as transactions take place. There is no record of the person who conducted that transaction as only the wallet number is used. Every user in the network is issued with a wallet, and the address of any wallet is a public key.
To transact in cryptocurrency, you require a wallet which is a public address and a private key. This key
is also a string of random numbers that needs to be kept secret. When the coins are sent from one user to another, they need to verify and sign the transaction using this private key. This format of two keys for every transaction underlines the security feature of the blockchain technology Once the message is sent to the network, the keys are valid
ated first. If they are considered to be valid, the transactions are put on the block, and nothing about it can be changed from t
hat point onwards. Every new transaction is added to the chain with these details and it is broadcasted to all the nodes which carry a time stamp that is generated in relation to the previous node. This makes the network very difficult to hack.
One can argue that the connection between various people has existed on the web for a long time and blockchain is no new thing. Well, peer to peer connectivity allows for the transfer of data but when it comes to valuable items such as cryptocurrency, the existing security measures used with data cannot be applied. Imagine a situation where there is no blockchain, and one wants to trade in Bitcoin. If you’re going to transfer the coins to a store and another person at the same time, there would be nothing to stop you from doing it. The case of double spending could be widespread and it is the main reason why peer to peer transactions have not been applied to cryptocurrency. The fact that a public record of all Bitcoin transactions is spread out means that the possibility of fraud is wiped out.
You might be wondering how viable this technology will be moving forward and honestly, that is not yet known. It has been available for more than a decade, and the rise of Bitcoin is the one that brought it the attention it has presently. This technology can be applied in various areas, and businesses are beginning to explore the opportunities it brings to them. However, the digital currencies could end up being a small part of blockchain technology, in the long run, owing to the massive possibilities that it offers to entities.
At Topcoincryptocurrency.com the essentials of a blockchain technology and digital currencies have been highlighted. The technology has been seen to operate on anonymity, transparency, open records and peer to peer transfers. It is almost impossible to fake a block, and the fact that nodes are spread throughout the globe makes it hard to turn off the network. While these networks can not be used to store data in the same way that we do on other databases, they offer massive opportunities and could be huge in the years to come. If you want to start buying bitcoins, you already have some basic information on how the technology operates.