If you have been into financing, banking, and investing lately, you might have heard the word ‘Blockchain’. With no clear-cut explanation of the concept, Blockchain technology is considered to be a next-level technology, out of the reach of a layman. However, that is not the case.
It is quite easy to understand Blockchain technology, and the terms associated with it, such as bitcoin. Here’s all you need to know:
Blockchain technology is a ledger – distributed and decentralized, thus, public. It is called Blockchain because every transaction made using cryptocurrency adds a block to the already existing chain. Yes, a block that holds transaction data and information which cannot be edited.
Components of ‘block’ in Blockchain
So, blocks are pieces of digital information with three components:
- Transaction information: The block stores all the transaction details such as time, date, and amount in dollars you spend on any purchase using cryptocurrency.
- Participators’ information: The block stores all the details regarding the person making a transaction, such as usernames – which block keeps as digital signatures.
- Unique code: Each block has a specific, unique code known as ‘hash’ that distinguishes it from the other blocks in Blockchain.
Each block is capable of holding up to 1Mb of data, which means several transactions can be stored together, but of the same participant.
How Blockchain Works?
For a block to become part of a chain, it follows a specific process. Here’s how it works:
- A transaction is made
- A transaction is verified
- A transaction is stored
- A transaction is given a hash and is finally added to the chain.
As soon as the block is added, it is available to be viewed publicly. Anyone, including you, can view the transaction information. That’s how Blockchain technology works as a transparent, public ledger.
Blockchain technology is being largely used for business purposes. If you choose to connect your computer with the Blockchain network, you will get to know right as a new block is added – when, where, and by whom. With Blockchain, it has become easier for businesses, especially the ones operating on cryptocurrency, to learn about audience needs and interests.
The Blockchain Technology of Bitcoin
Now, what does bitcoin have to do with Blockchain technology?
Bitcoin is one of the most popular and reliable cryptocurrencies; the transactions are made on Blockchain with bitcoin, so bitcoin is nothing more than digital money.
Bitcoin uses encryption techniques and so, not everyone can create a bitcoin of their own. Just like any other commodity, bitcoins are purchased and traded – it works like real-world money. The only difference is that it operates in the digital world – encrypted and handled by computer networks.
Bitcoin is used by Blockchain technology as a cryptocurrency. This way, it has provided for a large room of investment. People consider investment in the digital currency more beneficial than any traditional investment. Know that the value of bitcoin fluctuates as the dollar fluctuates.
Therefore, it is important to learn about Blockchain technology and bitcoins in detail before stepping into the digital financial world.