Today I will talk about what is blockchain technology?. So let’s get started
Let’s take an example of a money transaction, which we all do generally. Now if we have someone who wants to transfer money from his account to his partner’s account with whom he has done a trade deal. In a typical banking transaction, you’ll be transferring money from your account to your partner’s account. But if something goes wrong and the money does not get deposited and gets back to your account.
Why that transaction did fails?
What went wrong?
Here we have a Bitcoin assistant to tell you what could have gone wrong. There could be many reasons like some technical issues at the bank which could have cause the problem, the user’s account got hacked, and it could be very well possible. Or you have exceeded the transfer limits for the day, so you can’t do the transaction again.
Now there is a question which the crash currency will ask, and the answer is that we are talking about bitcoin which is a cryptocurrency.
Here I’ll be telling about:
- What is a cryptocurrency?
- The types of cryptocurrency
- What is blockchain technology?
- How does bitcoin transaction work?
- The features of Blockchain
What is a cryptocurrency?
A cryptocurrency is a form of digital currency that can be used to verify the transfer of assets from one party to another. It controls the addition of new units, there is a limited supply. It also provides secure financial transactions, the anonymity of the sender and receiver is maintained, the sanity of the transaction is maintained, and all it is done using cryptography. The transactions are safe and secure. The most important point is, they are not headed by any central authority! So that means that you can go extinct and we would not even need the bank either.
The basic benefit with the evolution of cryptocurrency is low transaction cost. The underline concept of having cryptocurrency is the removal of intermediaries by virtue of which it reduces the transaction cost between the parties. The more middle man the more cost gets added to every transaction.
Types of Cryptocurrencies
There are several types of cryptocurrencies. There are few other popular cryptocurrencies apart from Bitcoin, which have a major market capitalization and trading shares like Litecoin, Ethereum, Zcash, Dash, Ripple, Monero, Nem, and Stellar. These are few to name it but there are hundreds and thousands of other cryptocurrencies in the market, which are evolving on a daily basis.
What is Blockchain Technology?
Bitcoin uses a technology called blockchain to work the way it does. A blockchain is a continuously growing list of records (blocks), which are linked to each other. So it’s a list of block, which is getting change to each other and secured using cryptography. Each and every block is digitally signed and hashed.
How Does a Bitcoin Transaction Works?
Let’s consider the same previous situation but this time let’s make the transaction happened using a bitcoin. The same two entities who want to exchange money. Instead of that, they will be exchanging bitcoin but before that, they would have to create a wallet address on the Bitcoin Network and each will be having their own private and public key.
Whenever you want to send a Bitcoin on the Blockchain Network, you’ll be encrypting the transaction with your private key and broadcasting it worldwide for the miners to validate it. The miners around the world on the network will verify the authenticity of the sender, whether the sender has the right amount of balance to send that amount.
The miner will also validate the receiver, the identity of the receiver, the genuinity of its wallet address, and then it will verify the sanity of the transaction, whether the transaction can take place on the network or not. If verified the transaction would be added to a block, (which would also contain several other transactions) which is part of the blockchain. When the block is verified, it will be added to the main blockchain. Once this whole process has been done, the miner has verified the block, and verified the entire set of transactions in that block, the transaction would show that Bitcoins are reduced from one wallet, and added to another.
This is how the transaction very similar to the banking transaction gets completed without the intermediaries like banks.
Features of Blockchain
Some of the blockchain’s features are:
The blockchain is public distributed ledger which means everyone has access to all the records. If the user wants, they can access all the records from the time the blockchain was created.
The first block in the blockchain is called the genesis block. Any additions to the block are permanent and immutable. Any change, major or minor, is recorded into a new block and cannot be altered. This is the primary immutability feature of the blockchain.
There is no centralized authority. Since the ledger is distributed, the ledger cannot be altered by hacking into the central authority. Any change has to approve by a majority of the people in the network. Therefore, there are algorithms for proof of consensus.
The consensus is gotten exist in any blockchain network, where the majority of the stakeholders have to approve the transaction.
The blockchain can contain transaction details for assets other than money like property, vehicles, farming products, or any asset which you want to trace in any industry like supply chain or you want to use digital assets in retail, etc.