What is Blockchain and how does it work
Cryptocurrency since its inception has taken very short time in getting famous worldwide. It’s, in fact, one of the very few innovations that took so less time to reach millions of people. Very soon its impact in our lives and businesses will start to appear and they are expected to be positive.Cryptocurrency since its inception has taken very short time in getting famous worldwide. It’s, in fact, one of the very few innovations that took so less time to reach millions of people. Very soon its impact in our lives and businesses will start to appear and they are expected to be positive.
A very interesting aspect of digital currency is that there is no third party involved in a transfer of money, like banks are involved in a real-world transfer of money. How insecure? But it’s not. We will see shortly why it’s most secure way to transfer money.
Anyone interested in Digital money must have heard about Blockchain. In a very simple word, it’s the foundation upon which the entire building of digital currency stands. Blockchain allows movement of digital coins from sender to receiver. It’s an open ledger, that is distributed across thousands of computers around the world.
As per writing of this blog, there is no money involved in a transfer of Bitcoin, whether you are sending coins next door or to next continent. This is because in cryptocurrency there is nothing physical, it’s all about virtual bits roaming over the internet. Whom and where doesn’t matter in cryptocurrency, everybody is a stakeholder. But why there is no transfer fee? It’s because of miners. Miners are special computers that validate a transaction and adds it to the ledger, they provide their computational resources in order to validate a transaction. As a reward, miners are given Bitcoins. By 2140, there will be no more Bitcoin generated to reward the miners. So what miners will get as a reward in 2140? Well, we leave that post 100 years question to people of that era. They may add transaction fee or do something else as per their ease.
Having a digital coin means that ever since that coin is generated, after passing all transactions its latest record shows it’s in your digital wallet. This is the concept of having a digital coin.
In Blockchain there is a chain of transactions, that’s why it’s called Blockchain. These chain of transactions are public and open to all for viewing but not for editing. If somebody wants to make a non-valid transaction it’s immediately dedicated by thousands of nodes on the blockchain. That’s why we said this system is much more secure than traditional bank transfer.
As we say the digital currency is decentralized, it means the blockchain ledger is not owned by a single person rather its distributed across thousands of platforms. It’s that open ledger that makes cryptocurrency decentralized.
Having an idea of what blockchain is how it works, it’s now very clear that just like cars runs on the wheels, cryptocurrency runs on Blockchain. Possibilities of Blockchain technology seems endless. It enables transfer of cash beyond boundaries, with governments worrying how to get this money into the tax net and auditable. These are some concern that needs to be addressed before cryptocurrencies are accepted by the government agencies.
Also, Check What is Bitcoin
Hope my article “What is Blockchain and how does it work” helps. If you have any query, feel free to comment.