The cryptocurrency industry is relatively young and people are still learning about it. Indeed, some people already became millionaires thanks to this field of business. However, the biggest part of the worldwide society is still learning about it. They usually start with reading about different types of digital currencies. There are a huge number of them and they all seem like an attractive thing for investing. However, one of the phrases that you will read many times while researching is “blockchain”. This probably seems like a confusing phrase. Because of that, it would be good to make a detailed analysis of it.
First of All, What Is Blockchain?
Most of the beginners in the crypto world are wondering why a complex technology would get the name “blockchain”. Well, if you look at it from its most basic level, this truly is a chain made of blocks. However, you need to forget about the traditional meaning of these two words. They are more complex than you think.
More precisely, block is a digital information and chain stand for the public database. Well, the digital piece of information is something we will have to analyze more. This sort of information has three different parts that you should know about.
The first thing that blocks store is some pieces of information associated with transactions. This includes things like time, date, amount of money, and most recent purchases. Despite that, it also collects information about the sides that are participating in the transaction. However, you are not exposing here your personal name. Instead, the system is using a unique “digital signature” that only you can use. In other words, this is some sort of username.
Finally, the third type of information might be the most complex to understand. Each block collects and stores information that distinguishes it from any other block. Each block that is developed has a unique code well-known in the crypto world as “hash”. The special algorithm is used to create each cryptographic code.
The example might make things clearer. Let’s say that you purchased an item from a webstore that accepts cryptocurrency-based payments. After you made a transaction for the current item, you realized that you need one more. The details of the new transaction will look almost the same. However, the unique code is something that is going to be different between them. In this way, it is ensured that additional problems are not going to happen.
How Does Blockchain Work?
Well, this is probably the most difficult thing to understand for beginners. However, we will try to explain it in an easy language. Anyway, when the blocks store the pieces of information that we mentioned, they are all added to the blockchain. As you can conclude, blockchain is made of multiple blocks that come with different pieces of information. When the process ends, four different things can happen after that.
First of all, the transaction must occur. Let’s use the previous example once again. When you make the payment for a current item, the block will group with dozens of other transactions. In other words, your transaction will be packaged with the block of other users.
Despite that, the transaction is going to be verified. Without the necessary verification, your transaction would not be accomplished. However, users do not have to make any further steps. All the tasks are going to be accomplished by the computer network. It will check if the transaction details are the ones that you picked.
After that, the transaction is stored in the block. When everything is verified, the transaction that the user made is ready to go. All the necessary pieces of information are stored and it will be packaged with millions of others.
Finally, your block will get a hash. More precisely, it will get a unique code. With the unique code, the block gets the opportunity to be added to the blockchain.
We truly hope that everything we said is clear enough. You must educate yourself about this subject before making the first step in the crypto world.
Is Blockchain Safe Enough?
The online world brings many advantages to the lives of people. Yet, it is also full of scams and people are aware of that. When the money gets involved, the only thing that people require is security. Because of that, many beginners are wondering if blockchain features safeness.
The shortest answer you can give you is “Yes, it does” and you can expect security in several different ways.
First of all, every new block is stored chronologically and linearly. As we previously said, each block is added to the blockchain’s end. Despite that, the unique code is making it even safer. It is almost impossible for a block to go back and alter the contents of the block. Each hash code is based on math functions. Because of that, every digital information becomes a combination of letters and numbers. Even if someone tries to somehow change it, the entire code will automatically change as well.
Connection Between Bitcoin and Blockchain
Finally, is there a person in this world that hasn’t heard about Bitcoin? People that are not even planning to participate in this industry have heard about the strongest digital currency in the world. Indeed, this cryptocurrency had its ups and downs during a turbulent past. However, it remained strong enough to attract a huge number of investors and miners.
Anyway, we need to mention that the entire Bitcoin protocol is based on this technology. You have probably heard about the mysterious guy Satoshi Nakamoto. Officially, he is the creator of Bitcoin, but no one exactly knows who he is. It might happen that we are talking here about a group of people.
Anyway, he wrote a research paper as an introduction to the new digital currency. He described blockchain as the new electronic cash system that is fully peer-to-peer.
Let’s describe how the entire system of Bitcoin functions. You have millions of people using this digital currency. Imagine that only one person wants to buy new shoes with his coins. The first thing that you need to know that no one is controlling Bitcoin. Fiat money is controlled by governments and banks, but that is not the case with this currency. All the transactions are verified by the computer network. Now you understand why people say that the blockchain and Bitcoin network are decentralized.
Knowledge improvement is the key and that is the main piece of advice you should follow. We hope that things become clearer to you. However, if that is not the case, you might want to check usethebitcoin.com and expand your knowledge more. Go over the entire Internet, read every blog, and when you are ready – make the first investments.