The name “Blockchain” was used to describe an entirely new method of thinking about the financial system as well as the Internet. The system, according to its creators “will connect people on a global scale by using real-time digital currencies”. The Blockchains system has two layers that are private and public. The protocol permits users to transfer, receive and store money and records transactions and be part of the global money network. Blockchains can be used to store data on a ledger which tracks both the private and public keys that are associated to an account. This lets users keep track of their balances and manage their money over the internet without having to be a computer geek.
The reason why some call Blockchains “digital golds” is because it’s similar to the gold standard, in that it helps track the gold that has been bought. The ledger, however, uses digital gold instead of physical. The ledger allows users to add transactions and modify them in a matter of minutes, all at the convenience of their laptops, desktops, or even mobile phones. Transactions can be made in the same network, or between multiple networks. The best part about using a ledger is that it offers a method of making and receiving payments with no need for third parties or banks; hence the reason that the majority of businesses use the system.
The Blockchain’s decentralized structure is an important aspect. Although the ledger does allow for some blocks to be linked together by a specific computer but the entire system is comprised of thousands of individual ledgers that are distributed throughout the world. The ledger has extremely low fees for transactions and also has very little downtime. Its decentralized nature is what allows it to handle huge amounts of transactions and offer excellent security. If one computer crashes, the system will be shut down and there will be no other computers can handle the necessary transactions.
One of the major advantages of the Blockchain is the use of hash chains. A hash chain is simply an accumulation of various transactions happening in chronological order. In the simplest sense the transactions occur between nodes on the ledger. Nodes are independent computers that communicate with each other through a peer-to-peer networking protocol. Transactions occur as a result the simple confirmation each computer sends to the other. The transaction is later added to the chain.
Because the Blockchain is based on a distributed ledger, rather than a centralized one it is possible for a number of different chains to exist at the same time. If you’re wondering how all this works, here’s the breakdown. The transaction happens when an output is generated by the node that the transaction is being sent. Then another block is generated with the proof-of-work of the specific transaction.
Once two chains are created, transactions take place and are recorded in your ledger. The third block, also known as a chained together block, is made at this stage. It adds to the two previous ones. After the last block is made, it’s the whole ledger that’s being updated. The Blockchain is, in essence, is a way to secure the entire ledger, so that only transactions that are valid are recorded and verified.
It is fascinating to observe how the Blockchain operates. Consider how the entire world is connected through computer networks. Computers function like banks, working in conjunction with each other and processing transactions on a large scale. The ledger isn’t restricted to a specific location and all computers work together. That’s the beauty behind the Blockchain as each transaction is handled by the whole system in a way that is highly resistant to hacking.
This raises a good question: How can cryptosporters protect the security of their transactions? By utilizing central authorities. It ensures that each transaction is processed on every computer. This means that no one can altering the ledger or taking away transactions. It also requires collaboration between multiple computers, which means it is impossible for hackers to gain access and hack into the system, which could weaken the security of the cryptography employed.
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