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Blockchain Technology used in Cryptocurrencies

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Blockchain technology is one of the most revolutionary technologies to have been introduced in a long time. It has the potential to disrupt or replace existing industries. Blockchain is in essence a public ledger that records the whole history of transactions and agreements about who has spent what. It’s a distributed, decentralized database that no single person holds but is shared among everyone participating in the network.

The Blockchain is the underlying technology that powers cryptocurrencies. It is a public ledger of all transactions, or digital records of who owns what, designed to be virtually tamper-proof.

Blockchain as a Technology

Since the launch of Bitcoin in 2009, blockchain technology has been widely used in cryptocurrencies. Blockchain is a distributed database that allows for secure, transparent, and tamper-proof transactions. This makes it an ideal choice for handling digital currencies.

Cryptocurrencies such as Bitcoin, Ethereum, and Litecoin use blockchain technology to provide a secure and decentralized way of conducting transactions. By using blockchain, cryptocurrencies are able to avoid the costly and time-consuming process of traditional banking.

Blockchain has often been described as a “disruptive” technology due to its potential to revolutionize many industries. In the financial sector, blockchain could potentially eliminate the need for intermediaries such as banks and payment processors. This would result in lower fees and faster transaction times.

In addition to its use in cryptocurrencies, blockchain technology is being explored for a variety of other applications. These include smart contracts, supply chain management, identity management, and more. As the technology continues to evolve, we can expect to see even more innovative uses for blockchain in the years to come.

Types of Blockchain

There are three types of blockchain:

Public blockchains are decentralized and open to anyone who wants to join the network and participate in the consensus process. Bitcoin is an example of a public blockchain.

Permissioned blockchains are similar to public blockchains, but they require participants to obtain permission from a central authority before they can join the network.

Private blockchains are owned by a single organization and only authorized users can access them.

Permissionless blockchains like Bitcoin allow anyone to join the network and participate in the consensus process. Private blockchains, on the other hand, require users to obtain permission from a central authority before they can access the network.

The type of blockchain that a cryptocurrency uses depends on its intended use case. For example, Bitcoin uses a public blockchain because it needs to be accessible to anyone in the world. A private blockchain would not work for Bitcoin because it would not be possible for everyone in the world to obtain permission from a single organization. In short, Blockchain depends on various aspects.

How Cryptocurrencies are Created

Cryptocurrencies are created through a process called mining. Mining is how new Bitcoin and other cryptocurrencies are brought into circulation. It is also how blockchain transactions are verified and added to the blockchain ledger.

Mining is a computationally intensive process that requires powerful computers to solve complex mathematical problems. The first miner to solve the problem gets to add the next block of transactions to the blockchain and receives a reward in the form of a new cryptocurrency.

The amount of new cryptocurrency created with each block decreases over time as the total supply of cryptocurrency grows. This system is designed to mimic the way precious metals like gold are mined from the ground. The total supply of gold grows slowly over time as more and more is mined, and it becomes harder and harder to find and mine new gold.

Similarly, the total supply of Bitcoin grows slowly over time as more is mined, and it becomes harder and harder to find and mine new Bitcoin. The decreasing rate at which new cryptocurrency is created ensures that demand must increase in order for prices to rise. This system is intended to create scarcity and help prevent inflation.

Miners are not solely rewarded by the new bitcoin that is generated each time they mine a block. Users may also send a transaction fee along with their transactions, which is paid out to any miner who decides to include their transaction in a block they mine. Over time, as the bitcoin network becomes used for more and more transactions, it is expected that transaction fees will be more than sufficient for incentivizing enough miners to continue mining blocks to keep the bitcoin network safe, secure, and robust.

Ethereum blockchain applications are usually referred to as DApps (decentralized applications) since they are based on the decentralized Ethereum Virtual Machine.

Blockchain’s Role in Cryptocurrency Transactions

Blockchain technology is used to record and verify cryptocurrency transactions. Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and control the creation of new units. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.

Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services. Blockchain allows for secure, transparent, and tamper-proof transactions. This makes it an ideal platform for cryptocurrency trading.

There are many different types of blockchain, each with its own advantages and disadvantages. The type of blockchain that a cryptocurrency uses will affect its security, speed, and scalability.

Bitcoin uses a permissionless blockchain, which means that anyone can participate in the network without needing approval from a central authority. This makes it very secure, but also slow and expensive to scale. Ethereum uses a permissioned blockchain, which is faster and cheaper to scale, but is less secure since it relies on central authorities.

Blockchain technology is constantly evolving, and new applications are being developed all the time. Cryptocurrencies are just one example of how blockchain can be used to create secure, transparent, and tamper-proof transactions.

Conclusion

In conclusion, blockchain technology is a powerful tool that can be used in a variety of different ways. In the context of cryptocurrencies, blockchain provides a secure and decentralized way to store and transfer data. This makes it an ideal solution for managing digital currencies. With its potential to revolutionize the financial industry, blockchain is an exciting area to watch in the coming years.

ABOUT THE AUTHOR

I recently completed BBA (BUSINESS ANALYTICS) from CHRIST University, Lavasa, Pune Campus.

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Aryan Bajaj

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