What is a blockchain?
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To understand blockchain, let’s first understand cryptocurrency. Cryptocurrency is defined as a digital currency that can be used to buy goods and services. There is no central authority controlling a cryptocurrency. Advanced coding is involved in storing and transmitting data between the wallets and public ledgers. It doesn’t depend on any bank. Its primary aim is to provide security and transparency. Blockchain technology makes cryptocurrency secure. Bitcoin is the most popular and valuable cryptocurrency.
To put it simply, a blockchain is a system of recording information in a secure manner, which makes it almost impossible to change or hack. Its primary aim is to provide security and transparency. Blockchain technology makes cryptocurrency secure. (Because security is important, ain’t it?) Blockchain technology accounts for the issues of security and trust in various ways. First, new blocks are always stored linearly and chronologically. That is, they are always added to the ‘end’ of the blockchain. It is very difficult to go back and alter the contents of the block.
So what’s the entire fuss about? Despite several attempts to make money entirely digital, it has failed due to easy hacking of systems, lack of a good security system. Blockchain has no owner. It is run by people who use it. The blocks and the contents within them are protected by cryptography. Cryptography protects the previous transactions within the network, and ensures that it is not forged or destroyed. This way, the blockchain technology allows a digital currency to maintain a trusted transaction network. This does not rely on any central authority, and is thus decentralised.
What is a hash
Each block contains its own hash, along with the hash of the block before it. A hash is a mathematical function that converts an input of arbitrary length into an encrypted output of a fixed length. It is a digital ledger of transactions, that is distributed across the entire network of computer systems on the blockchain. Each block contains a number of transactions. Each time a new transaction happens, it is freshly recorded.
This decentralised database is managed by multiple participants, known as Distributed Ledger Technology (DLT). Like a database, Bitcoin needs many computers to store its blockchain. For Bitcoin, this blockchain is just a specific type of database that stores every Bitcoin transaction ever made. Bitcoin’s blockchain is used in a decentralized way. However, private, centralized blockchains, where the computers that make up its network are owned and operated by a single entity, do exist.
Where does a prominent businessman who sells electric cars fit into all this, you ask? Although he claims to own bitcoin, he actually doesn’t. He’s just accepting it as a payment for his cars.
Bitcoin consists of thousands of computers, but each computer or group of computers that hold its blockchain is in a different geographic location and they are all operated by separate individuals or groups of people. These computers that makeup Bitcoin’s network are called nodes. In a blockchain, each node has a full record of the data that has been stored on the blockchain since its inception.
Blockchain has several advantages. It is extremely accurate. It is entirely done by computers, to avoid human error. Transactions on the blockchain network are approved by a network of thousands of computers. It is cost effective. There is no bank involved, and there is no third party person involved in the transaction. Bitcoin has no central authority and minimal transaction fees.
A blockchain does not store any of its information in a central location. It is spread across a network of computers. When a new block is added to the blockchain, every computer on the network updates its blockchain to show the change. A blockchain is extremely efficient in terms of timing. The transaction is almost instant. Unlike financial institutions, a blockchain works round the clock. This is particularly useful for international transactions, which take longer due to time zone differences. It is secure, as each blockchain contains its own hash. Most blockchains are entirely open-source software. Anyone can view its code. Auditors can review bitcoin for security.
Blockchains are great for the environment, as they increase energy with P2P electric grids, increase access to power in areas prone to poverty.Tracking the carbon footprint of each product using the blockchain would protect this data from tampering and can determine the amount of carbon tax to be charged.
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