In a previous post, we took a look at cryptocurrency and some of the security risks posed against those who were wanting to invest. Something that still needs to be dived into further is how cryptocurrency is made. Beyond that, the topic of blockchain is something that is creeping into our everyday conversations just as cryptocurrencies like Bitcoin are becoming more mainstream. Here we will take a look at what blockchain is, cryptocurrency mining specifically, as well as other uses for the blockchain.
What is Blockchain?
A blockchain is a database shared across a network of computers which bundles together information from various inputs. Block in blockchain refers to the blocks in the database; each block is made up of a bundle of records which are made up of information. The chain portion of this work refers to a series of blocks all linked together to create a chain of blocks which are made up of records… confused still? Of course. As with anything else, this might be made clearer through an example: Say that one record (a piece of one block) is the trade of a cryptocoin from one account to another. This record will include as much detail as is available: the number of coins sold, their valuation in dollars, pounds, etc., and a digital signature from each of the participants which validates that transaction. Another way to describe the blockchain is as a ledger or a receipt of transactions which have occurred.
After the record occurs it is checked by the network of computers which make it up. The computers in this network are called ‘nodes’ and they verify the legitimacy and validity of the transaction by reviewing those details provided in the record. The nodes use this criteria to either decline or accept the record. Accepted transactions are records deemed safe to add to a block in the chain. To connect a completed block to the chain and make it a part of the blockchain, it is given a code called a hash as well as the unique hash for the preceding block; this action links them together in the correct order.
Blockchain and Cryptocurrency
As mentioned in the previous blog post discussing cryptocurrency, a major factor that either makes people highly interested in or completely deterred from investing in the growing number of cryptocurrencies is the fact that this form of money is not regulated or centralized. However, users have to have something to keep track of their online money; this is where blockchain technology comes in. Blockchain is the permanent ledger of transactions in the peer-to-peer networks of cryptocurrency. This is the alternative method used to track, validate, and confirm transactions when there is not bank or governmental regulatory system in place.
Other Potential Uses
While its primary function currently is as a basis for cryptocurrency transaction tracking, blockchain technology’s value is being realized and there are other potential uses being explored for future implementation. These include many different outlets like fund transfers, real estate processing platforms, supply chain and logistics monitoring, as well as marketing monitoring. Blockchain technology is a valuable tool to help track, record, and monitor trends and we will likely see it used in more ways than this in the future as it has proven to be an essential piece of the success of cryptocurrency.