The world of cryptocurrency sounds like a complex maze – one that is easy to get lost into – but take heart; it’s not as difficult as it seems. If you’re thinking to take part in this branch of investment, understanding the basics will help you gain.
At the center of it all is blockchain, which, simply put, is what it sounds – a chain of blocks. The blocks represent digital data stored in a public database, keeping records of the currency’s transaction journey. This includes the time, amount, and the people participating in a certain transaction.
Each block is marked with a digital signature, a special username that makes the data identifiable to you without giving your actual name. Each strand of data comes with a special code called the “Hash,” which is encrypted with unique algorithms.
Generally, blockchains are ledgers, distributed, and decentralized so you’ll know where the currency came from. Think of the Hash as a receipt number.
What happens with blockchain?
The “chain” part happens when new information is stored inside the block. For this to occur, one must make a transaction – a splurge from an online store or a digital subscription.
Just like other online purchases, this transaction requires verification. Because there are no banks or government authority that controls this currency, the purchase is checked for legitimacy by a set of computers. When green-lit, the transaction is given a new hash, and the data will be stored in the block, along with the hundreds of transactions before it.
Blockchain data are stored chronologically. Each block is added to the end, gaining a unique position called the Height. It is done for security purposes; the block of data makes it difficult for hackers to manipulate the record of events – in order to change a block, one had to alter every transaction, as well as the equivalent hashes beside it. To increase security measures, blockchain data are replicated within every computer in the network, should the need to verify information arise.
Modern technology has paved the way for digital currency to be secure. Blockchain has made it possible for users to transact safely across the internet, verifying each data without revealing their footprint.