blockchain in cryptocurrency

The cryptocurrency trading that is running on Blockchain technology is getting worldwide attention like never before. Despite not regulated in every country, cryptocurrency trading gain the trust among the investors and traders, and that is thanks to Blockchain technology.

What is Blockchain in Simple Words?

A Blockchain is an innovative technology that works in the form of an open and decentralized database. The users enter the information within this database which is recorded on the blocks. Each block represents a small repository of transaction history.

Once the users (also called the nods) had generated a sufficient amount of blocks, they get assembled in a chain. A large number of chains form the ecosystem that is virtually impossible to hack.

The main motive of the network is to carry out transparent peer-to-peer financial and data transactions. The blockchain has already found application in many areas of social and economic life. 

Blockchain in Cryptocurrency

As we got to know Blockchain is a type of database, where a collection of information that is stored electronically on a computer system results in a database. As far as cryptocurrencies are considered, a Blockchain is a digital ledger of transactions.

The data is stored in an encrypted format. These encrypted blocks of data are then chained together to form a chronological single-source-of-truth for the data. Each block in this chain contains a number of transactions.

Consider a case wherein a new transaction has taken place. Every time this happens, a record of that transaction is added to every participant’s ledger.

Ever wondered what makes Blockchain technology so famous? Well, this is not the first time that someone has come up with the concept of digital currency. In the past as well, several attempts have been made to create digital currency money. But all of them failed.

The most common reason as to why they failed is because of a lack of trust and security. But with Blockchain, the story is different altogether. Here, the people who use it run it. Hence, the technology remained successful in gaining the trust of the people.

How is Blockchain used in Cryptocurrency?

If you cleared with basics related to Blockchain, let us talk about how is Blockchain used in cryptocurrency.

As we know whenever there is a transaction to take place, there are several steps that it undergoes in order to get completed. See the steps given below.

First Step: Authenticating the Transaction

As obvious as it can get – every transaction has two parties. One is the sender and the other being a receiver.  The transaction between these parties is authenticated using cryptographic keys. These keys are nothing but a string of data – more or less like a password that identifies the users.

There are two keys – public and private. Everyone can see the public key and private key, as the name suggests, only the user can see. Using both these keys, the users can unlock the transactions that they want to perform. With this step, a block that represents this transaction is created.

Second Step: Approving the Transaction

Now that the transaction is approved between the users, it needs to be authorized. For this, the majority of “nodes” (or computers in the network) must agree that the transaction is valid. Therefore, the block which has the current transaction is sent to every node that is resent in the network.

Third Step: Verifying the Transaction (Mining)

Now, here is an interesting point to note. People who own the computers in the network get incentives to verify transactions through rewards. This process is known as ‘proof of work’. They are required to solve a complex mathematical problem in order to add a block to the chain.

This process of solving complex mathematical problems is known as mining. The ones who mine are called miners. These miners get rewarded for the work they do – normally in the form of cryptocurrency.

Fourth Step: Adding into Blocks & Distribution

After this, the block is now added to the existing blockchain. And following the addition, the update is then distributed across the network. In this manner, the whole transaction is now complete.

One of the best of Blockchain is it a highly secured platform, holding the potential to create a decentralized peer-to-peer network for organizations, and being trustworthy, it can easily be concluded that this technology is here to stay and will gain a lot more popularity in the years to come. But make sure to keep reading about such complex technology to stay updated.

Also Read: How Blockchain Technology Works & How It Can Be Used in Business

And now not only in Cryptocurency, this technology is also used in developing various applications in different industries. A Blockchain development company can now develop applications like Wallet, Hyperledgers, and Smart Contract and other interactive applications to give better transparency and security to end-users.