Blockchain technology is the foundation of cryptocurrency. The phenomenon was introduced back in 2009 and is the driving force behind several ambitious financial projects today.
But what exactly is Blockchain Technology? And how does it feature in cryptocurrency transactions? You’ll find the answers here.
What Is Blockchain Technology?
Blockchain technology enables decentralization; all transactions made through a decentralized system cannot be controlled by any central or government authority. This technology also utilizes cryptographic networks that encrypt any message shared between two parties. Only people with the right permissions can access these messages.
It is based on a publicly accessible ledger network that facilitates secure transactions on a global scale. Due to its easy accessibility, the network offers unrivaled transparency.
How Does Blockchain Technology Work in Cryptocurrency Transactions?
To understand blockchain better, let’s take the example of a book and its pages. Blockchain technology consists of blocks, which can be considered as the pages of a book. The book here is a globally distributed ledger network.
Although these are ‘pages’ of a book, the information in them cannot be tampered with. This technology also makes use of public and private keys that work together to encrypt messages and keep the data in them confidential. A person is only granted access to this info when he signs in to the message by providing his digital signature.
What Benefits Does Blockchain Technology Provide?
1) Transparency: This is one of the biggest advantages of using blockchain technology for transactions. The vast ledger network lets people access all transactional information, making fraud detection easier.
Although the transactions are easily traceable, the identities of people are not. Users execute fund transfers using a randomly generated 30-digit address that safeguards their identity.
2) No Third-Party Interference: The decentralized system lets you transact freely without any third-party interference. This kills two birds with a single stone – the transaction costs are cut down and users enjoy direct peer-to-peer transfers.
3) Immutability: In blockchain technologies, financial records cannot be tampered with. The cryptographic hash function in such tech uses complex algorithms to prevent data manipulation. It’s practically impossible for hackers to alter these records.
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