The Blockchain Technology and Its Relationship With Cryptocurrencies
Blockchain technology consists of complex processes to ensure the safety and authenticity of the entire system. While it can be complicated, its core concept can be defined to make it easier for you to understand what it is all about and how it makes cryptocurrencies reliable.
The Blockchain Technology
The blockchain is a kind of database that stores all the transactions that transpired in the whole system. It is a type of digital ledger used to authenticate transactions by duplicating itself and distributing it across the network of computers in the system.
Each block in the blockchain consists of several transactions. Every time a transaction occurs in the system, it is recorded in every participant’s ledger, which is then compiled to create another block that is added to the existing blockchain.
The blockchain ensures the integrity of the system by creating a chain of records with multiple copies across the network. This way, if someone tampers with the ledger, it will be easily visible. Intruders will have to change every block in the chain if they want to successfully tamper with the data of recorded transactions.
Blockchain is different from an ordinary database because the latter has a centralized entity in charge of maintaining the integrity of the data. Blockchain, on the other hand, is decentralized because nobody is solely in charge of overseeing the entire system. The nodes using the system are the ones that check if the integrity of the network is still intact and make sure the digital currency still has value.
In a blockchain, there are three concepts or entities involved that make the whole system functional:
Every block in the chain has three basic elements: data which contains the information, the nonce which is a 32-bit number, and the hash which is a 256-bit number used for security.
A node is any kind of electronic device connected to the system and keeps a copy of the decentralized ledger. It stores updated copies of the digital ledger for verification of transactions.
Miners are responsible for connecting the blocks to the existing chain by solving complex math problems. When the task is completed by a miner, they are rewarded with a token they can use for transactions within the system. This is how new coins or tokens are minted into circulation.
How the Blockchain Functions for Cryptocurrencies?
Cryptocurrencies use the blockchain’s decentralized ledger system and enhanced cryptographic security to record and safeguard online transactions. Blockchain technology helps cryptocurrencies completely avoid the interference of central banks to make international transactions work.
To secure transactions, each node in the network has a digital wallet secured by public and private keys. These keys are designed to protect the contents of the wallet from tampering and hacking.
Blockchain technology is the backbone of most cryptocurrencies that exist today. Its features make it possible for digital currencies to be decentralized, secured, and reliable despite having no overseeing body to monitor and maintain the credibility of the whole system.