Talks around cryptoassets have been ongoing for quite some time now, and with it comes language which perhaps may be unfamiliar to most. Maybe you have heard terms along the lines of “blockchain technology” for those of you who’ve been keeping close tabs on advancements in the field. Even so, the phrase is unusual and could be difficult for newbies to define. If it were to be summed up in just one sentence, blockchain technology protects the data that is shared between people and systems. It's impossible to completely cover the whole term in that sentence, though. A full understanding of the topic is more complicated, but before elaborating on how it works, let's do a deep dive into the definition by breaking the term up.
What Is Blockchain?
The digital system is comprised of two parts — the block (perhaps that was obvious) and... you guessed it — the chain. Read on for more handy info on both.
- The Block. “Blocks” are essentially a space that is used for storage. However, this is much different than a storage unit that gathers old wares and dusty artifacts — instead, blocks store transactions. Blocks must track and store dates, monetary amounts, users, and times that are associated with various transactions. However, one block isn't able to hold all of this data — therefore, there are numerous blocks floating around that must be distinguished from one another. A “hash” makes blocks unique by generating a blockchain crypto code, distinguishing new blocks from others.
- The Chain. Blocks accumulate a public database. Each block differs from the last but stays connected, which is where the chain concepts come to play. They’re connected by their codes, referring to the last, and building from that — like building blocks.
How Does Blockchain Technology Work?
So to put it simply, the blockchain (short synonym of distributed database or ledger) is data that is sorted in blocks, which create an unchangeable chain. But how does it happen? A few things need to be in order. Let’s define what it looks like.
Blockchain Starts with a Transaction
This transaction could be an online purchase. You’ve added something to your cart on a website and complete your order. That’s as far as the average user’s involvement goes. The technology handles the rest, leading to the next step.
Transactions Are Verified
Every transaction is screened before it goes into a block. This is an automatic process via computer networks that verify it, ensuring the transaction occurred as intended. It confirms the details like dates, times, amounts and users.
As soon as relevant transactions are verified, they are put into a block with other transactions like them.
Blocks Are Assigned A Hash
Blocks are assigned a unique hash when the contents have been verified. Once the block asserts its place on the chain, it is public.
What Are the Advantages of Blockchain?
Financial security is where blockchain technology thrives — its explained usage comes with a number of perks that answer the tried and true question for many smart companies: “What can we do to protect ourselves?”. Here are five advantages of the application of blockchain technology; hopefully, these could give you an answer to your pressing questions:
Blockchains Are Automatic
The dencentralised databases are smart in the way that they update themselves every fixed amount of time, for example, every ten minutes — that’s right, no person or device is pulling its strings. The storage service is automatic, adding new blocks and updating the chain all on its own.
Blockchains are Open to the Public
We know what you’re thinking, but no, “open to the public” doesn’t mean “an invasion to the privacy". Blockchain isn’t necessarily anonymous, but it doesn’t reveal personal information either. Transactions are public, but the users tied to them remain non-specific. In a place of actually identifiable information are usernames and digital signatures, keeping the rest confidential. That’s all!
A blockchain’s contents are open for all to see. A part of that has to do with its wide dispersion, existing across many computers and systems at a time. This spread is made up with identical copies, all of which update live and in sync with one another.
Blockchains Can’t Be Forged
The system for digital asset storage has the following features:
- The risk of forgery is reduced because blockchain’s existing blocks are permanent fixtures.
- Information can’t be edited later, making the system as shielded as it is. Instead of editing, new blocks packed with fresh data are added to the sequence.
- Changes can be annotated, but prior information will always be referenced — it won’t be unwritten.
Blockchains Are Structured
Transactions are entered in the blockchain by order of event, for instance, the transaction between wallets or mining a new block and made permanent upon input. This way the database maintains a clean and orderly history.
The Blockchain Technology World Is a Nightmare for Hackers
If anyone is thinking about hacking, they would certainly have their work cut out for them. All of these advantages make it strenuous for hackers to manipulate. The hacker’s effort proves useless from the start.
Being so widespread across computers and networks makes hacking it an impossible feat. They’d need to tediously manipulate every single existing copy of the database.
How is Blockchain Used In Cryptocurrency?
An electronic cash system was introduced in 2008, and following it came the manifestation of many other cryptocurrencies. All of these were prospected to totally revamp the financial game, but they were in need of a ledger system to operate on. Without, they’d float insecurely in a vast void. That’s where the blockchain revolution starts. A year later and the first transaction involving the dynamic duo was recorded, and blockchain developments have taken to a fast-paced climb since 2009. This kind of technology comes with transparency and security that can be used in tracking fraud, confidential records, intellectual rights and more.
Cryptocurrencies and blockchain technology emerged from the fear of what would happen if banks collapse in the face of insecurity. The threat posed on the value of a currency is reduced by the blockchain crypto influence. Together, the two concepts are used to aid finance on a global scale by helping countries that are otherwise suffering from unstable currencies, all while eliminating those fees associated with transactions and processing.
Blockchain uses vary now, but cryptocurrency and blockchain have always had each other. By 2016, the evolution was recognised as legitimate, and there haven’t been any doubts about the prospective blockchain developments to come.