December 11, 2017
Most people use a trusted third-party such as a bank to make a transaction. But what if we told you that nowadays you could make a transaction directly to your recipient? This is where blockchain comes.
Blockchain is like a shared record book that is located in a central location. There are thousands of copies of this record book, stored on computers all around the world. That being said, this shared record book is not owned by one individual or organization. It’s owned by everyone who has a copy. To understand about blockchain furthermore, take a look at this explanation below.
So, What is Blockchain?
It’s a digitized, decentralized, public ledger of all cryptocurrency transactions. Identified by a cryptographic signature, each block collects a time-stamped batch of the transaction to be included in the ledger. Those blocks are all back-linked, they refer to the signature of the previous block in the chain, and that chain can be traced all the way back to the very first block created.
How Does Blockchain Work?
Let’s say you’re going to make a transaction. Each of transaction will go out on a P2P network, which is called “nodes”, Once your transaction is validated by the nodes, the transaction will be combined with other transaction to create new data blocks for the ledger. This new data block will be added to the blockchain and stored permanently. That being said, you and all the other users have complete control of the value you own, there is no third party that holds your value or that can limit your access to it.
The Technologies Behind Blockchain
Public key cryptography
In order to perform a transaction on the blockchain, you need a wallet, a program that allows you to store and exchange your Bitcoins or any other digital currency. Each wallet is protected by a special cryptographic method that uses a unique pair of different but connected keys: a private and a public key.
The main purpose of this component of blockchain technology is to create a secured digital identity reference. The combination of these keys can be seen as a form of consent and create a useful digital signature. In turn, this digital signature provides strong control of ownership, which is comprised of a string of text that is the result of a combination of your transaction request and your private key, thus it cannot be used for other transactions.
However, a strong control of ownership is not enough to secure digital relationships. The authentication must also be combined with a means of approving transactions and permissions. This is where the distributed network comes in.
When cryptographic keys are combines with this network, a useful form of digital interaction emerges. The process begins with you taking your private key, making an “announcement” that you’re sending a sum of the cryptocurrency, and attach it to your recipient’s public key. After that, a block—which contains a digital signature, timestamp, and relevant information—will be broadcasted to all nodes in the network.
blockchain has disrupted the world of finance. It is not a mainstream choice to make a transaction, of course, but blockchain can help reduce fraud because every transaction would be recorded and distributed on a public ledger for anyone to see. The demand for blockchain-based services is currently on the rise and it is expected to change the way data is processed and the investments are handled. What do you think?