Cryptocurrency

How does blockchain technology work?

How does blockchain technology work

The purpose of a blockchain is to electronically store digital information which can be shared within the computer network. Playing a crucial part in cryptocurrency systems, such as bitcoin and Floki Coin, they maintain a secure record of transactions which keeps track of data and creates trust for the consumer without the need of an additional party. Unlike traditional databases, a blockchain structures the data differently by blocking the information into groups, also known as blocks. When the storage capacities of the blocks are filled, they are closed and linked to the previous block which forms a chain of data, compiling sets of information which can be utilised by creating tables. Each block comes with an exact time stamp when it is added to the chain, so the line of data becomes a unique timeline.

The purpose of a blockchain

Blockchains are used to record data, keeping a hardcoded version of digital information which can be used to keep track of transactions. The data can be distributed but not edited, deleted or destroyed, being a foundation that can be accessed when needed.

Once the transaction has been entered, it is transmitted to a network of computers which are located all across the world. To confirm the validity of the transaction, the network of specialised computer equipment solves equations and once confirmed, they are clustered together into blocks. As the blocks become chained together, the long history of time stamped transactions are a permanent string of data which are stored securely. Being an accurate set of data which cannot be tampered with or deleted, customers can be sure that their transaction information is safe and secure, building up trust when they choose to use cryptocurrency.

What is blockchain used for?

As well as storing transaction history, the versatility of blockchains means they can also be used for a selection of other purposes such as product inventories and legal contracts. The trustworthy and secure nature of blockchains offers intrinsic value, being a quick way to transfer value with little to no cost. Due to the online nature of the process, no physical form exists, keeping the blockchain stored safely within the advanced computer equipment which can only be accessed by authorised personnel. The attributes of the cryptocurrency, such as the total supply, are agreed on by the members of the network. With decisions being made by the majority of the decentralised network, a central bank is not required, eradicating the need for third party involvement.

Since the information is not stored in one central location, risk is reduced if there is a fault within the system. A blockchain allows the information from the database to be spread out across various network nodes stores at different locations, enhancing safety and security measures. If somebody tired to alter the records, the other nodes would not be accessible to reduce any tampering, making it easy to identify the node which contains inaccurate information, maintaining accurate data which can be securely stored.

 

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