Are blockchain, bitcoin, cryptocurrencies on your mind? Are you struggling to understand how blockchain works? Are you looking for learning information about the system to help you get started? The following introduction will help you establish the relevant knowledge framework.
Blockchain! For more than a decade, the word has appeared on the internet, social media, news, and gained a lot of attention around the globe.
1. Blockchain and its operation
Known as "distributed ledger technology" or "DLT," blockchain technology is a technology that allows digital information to be distributed but not copied. In this technology, digital information is transferred in "blocks" stored in a public database called a "chain."
Blocks in the blockchain exclusively consist of digital information such as transaction dates, participant details, etc. Each block stores a unique code called a "hash" that distinguishes each block.
2. How does blockchain work?
Consider a spreadsheet that can easily be shared with a network of computers, where thousands of copies can be created. You update any data in the spreadsheet and it updates on all computers on the network. Blockchain works similarly.
Whenever a new transaction is requested on the blockchain network, a new block is created with the details of the transaction. The block is given a unique ID called a "hash". This block is sent to all nodes in the network to confirm transactions.
Nodes validate transactions and share their proof of work. Nodes are rewarded for successful proof-of-work. Transactions are completed by adding blocks to the existing chain.
3. Why is blockchain immutable and untraceable?
Each block contains three main pieces of information: - data, previous hash and current hash.
When a person named A has to transfer $100 to a person B. Create a block with transaction details and a unique hash. Also, if person B transfers $50 to person C, a new block is created using the previous hash, and the new hash is calculated and stored.
As we can see, each new block carries the hash of the previous block. Therefore, any possibility of illegal activities will be eliminated. If in any case the transaction is changed, the hash value is not replaced, but a new block is created with the new hash value.
Blockchain technology has revolutionized banking and financial markets, the cybersecurity space, supply chain management, artificial intelligence, and more. It can be seen that since its launch, it has started disrupting many industries through its technical characteristics.
Among all the applications of blockchain technology, finance is the first and main field of use