“Blockchain Technology” has been buzzing over the time and people’s curiosity to know more about it has been cumulating day by day. Everyone knows it is the concept behind the most popular Cryptocurrency, but what is it actually? And how it is being implemented to work? Let’s dig it out.
Blockchain Technology — The Concept
Imagine you are working on a legal document in a group and the group members are at different physical locations across the globe. You make a change send it to others, they all verify and if necessary, again make a change. This alteration cannot take place simultaneously and the verification as well. You can envision the ample amount of time utilized for the document to get ready. Time could have been saved if the members of the group can rectify and verify at the same time where everyone holds the updated copy of the document. No one has to wait for the updated copy to be reached.
Blockchain technology fulfils this gap. In this technology, all the computers/nodes are connected to each other. There is no central server, unlike the Internet. Yes, you read it right. There is no central repository which sends and receives data to the child nodes.
Here every node acts a parent node. Every node has the access to the updated copy of the document and each one can edit the same. Thus, a single document is shared all over the network in its updated format. So, no fear of losing the data even if any node gets hacked. There are other nodes to recover the data. One point is clear here, blockchain technology is based on decentralization concept.
It is a distributed ledger and is public. Anyone in the network can have an access to it. Nobody controls the network, it is collectively run by each and every node of the network. People joined over this network have no anxiety of the network to crash down as there is no single point of failure. It is transparent and no one can corrupt it.
So far, after reading this, you might be clear that blockchain technology is decentralized, robust, highly secured, transparent, incorruptible and a new generation of network.
The primary use of blockchain technology is for the cryptocurrency “Bitcoin” which is defined as peer-to-peer virtual digital currency.
How Bitcoin uses Blockchain Technology?
Here’s the answer you have searching like hell on Google. You have almost made up your mind to buy bitcoins but still scratching your head on how does it actually works? It works on the blockchain technology. Let’s figure out how.
Suppose you are residing at US and wants to transfer 25 bitcoins to your friend residing in UK. You’ll transfer them using bitcoin wallet where you know the public address of your friend’s wallet. Once you initiate the transaction, unlike the conventional banking system, it will not go to a central authority or financial institution. It will rather be distributed across all the nodes of the network.
There are specialized programmers called “Bitcoin miners” who solve the puzzle using specific hardware, software and computing power. The one who solves the puzzle first will get a chance to add the block to the public distributed ledger. He/she will also receive bitcoin as a reward. This entire process is also known as bitcoin mining.
Bitcoin mining is the process when brought Bitcoin Cash into circulation
Now, that the block is added, the transaction is verified and ready to get accomplished. After the transaction is successfully carried out, 25 bitcoins from my balance are deducted and are added to the balance of my friend. This method uses Secure Hash Algorithm (SHA) for computation. It is just an example of one single transaction. In reality, a myriad number of transactions happen at a time and the miners are busy solving them. A block is added as each puzzle is solved and a chain of blocks is formed. Hence, the name blockchain. A new block is added every 10 minutes and thus the entire network is updated every 10 minutes.
The blockchain has a record of each and every transaction occurred till date. Again the transactions are irreversible, you cannot have the funds back as you request in PayPal. You can get back only if the receiver sends you back.
To Conclude
Blockchain the backbone of bitcoin and other cryptocurrencies. It will appear more complicated by looking more closely. But not to worry, unless and until you want to mine bitcoins! The basic knowledge is enough to trade and invest in bitcoins.