Blockchain technology is revolutionary because it doesn’t require a central authority. On a blockchain platform, every user or participant maintains a copy of the core ledger, meaning there is no singular party owning or controlling the master copy - it’s decentralized.
This ledger is open and accessible to all, providing a public history of all of its transactions.
Instead of chaining thousands of transactions together, a set amount of them are stored in blocks for simplicity’s sake. Each block has its own 64-digit code that proves its validity, preventing double-spending and manipulation.
The entire process is automated, removing the need for a centralized third-party. Each blockchain has its own cryptocurrency, as well, that allows users to interact with the network. The goal is to revolutionize the way information is stored.
Blockchain technology is disruptive owing to its important features as described below:
• Acting as a Distributed Ledger and Peer to Peer Network
• Proof of Work Consensus Algorithm
• Public Key Cryptography
• An Incentive Scheme
Proof of Work (PoW) is the validation process behind blockchain technology. This validation requires participants called miners. Miners provide their computing power to solve complex algorithms on a blockchain network and are rewarded in cryptocurrency for doing so.
On the Bitcoin network, transactions are stored in blocks, as mentioned. Each block has a unique, 64-digit hexadecimal code that proves it is unique. The problem is, that code needs to be found. This is where the miner’s computer power comes in.
Once a miner finds this mathematical value, the miner who found it broadcasts this newly solved block to the entire network to verify. Once verified, it's added to the blockchain and the process of solving the next block starts immediately.
Every cryptocurrency wallet comes with a public key and a private key. These two are essential security features when using cryptocurrencies and can be compared to an email address and password.
A public key can be shared with others, as it’s how someone sends cryptocurrency to your wallet. Private keys prove ownership of cryptocurrency. Nobody should ever know your private key except for you. If you lose your private keys, you lose your crypto, hence the saying “not your keys not your coins.”
Not only do miners get rewards for verifying transactions in a Bitcoin blockchain, but the process of mining also increases the security of the blockchain network. Both parties win. At the moment, Bitcoin miners receive 6.25 Bitcoin per block mined. The amount of Bitcoin reward halves every four years, with the latest halving held in May 2020.
Depending on the use case, there are several types of blockchain:
This is a permissionless, open, and non-restrictive blockchain network. Anyone with an internet connection can access the network and become a participant. Examples of public blockchains include Bitcoin, Ethereum, and Litecoin.
A private blockchain exists within a closed network, making it restrictive and permission-based. Unlike a public blockchain, private ones have a controlling organization in charge of security, accessibility, and authorizations. Examples include Hyperledger and Multi-chain projects such as Fabric or Corda.
This is a combination of a public and private blockchain. Hybrid blockchains are similar to private networks in that they’re selective over who can see information. However, some parts of these networks are often public. This is great for more controlled blockchains, top-level information is limited to executives, but anyone can see the more public information. An example includes the Dragonchain network.
A blockchain platform allows users to authenticate digital information while also creating value online. In fact, blockchain use cases go beyond the present application in the finance and banking world. Some of the industries that can benefit from blockchain technology include supply chain, crowd-funding, music, healthcare, governance, financial markets, and energy, among other spaces.Start Trading
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