What is Blockchain & How Does it Work?

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As a real-money gambler or even an investor, you will want to understand how blockchain technology works if you are using any cryptocurrencies like Bitcoin. This technology is one of the greatest innovations and was developed to support Bitcoin transactions. Today, blockchains are used to power many cryptos, and developers are even starting to use this technology in the fields of medicine, finance, and business.

It is important to know how blockchain works, why it has value, and what makes it stand out against other internet technologies that are being used today. With blockchain, users are able to perform the most secure financial transactions that are virtually hack-proof, providing a safe way to make payments, receive funds, and even build investment portfolios.

How It Works

To have a better understanding of how blockchain technology works, we will use Bitcoin transactions as an example. When Bitcoin is purchased or sold, it will be entered into a network of computers that are referred to as nodes. This network is sed to confirm all transactions through the use of computer algorithms and is referred to as mining. Miners who create new blocks will be rewarded with bitcoin and these rewards are paid via newly minted coins or network fees.

Once the sale of crypto is confirmed, that sale will be added to a specific block on a ledger. The block will then be chained to all previous blocks of transactions using a hash, or a cryptographic fingerprint. The sale is then processed and complete. Blockchain technology was first mentioned back in 1982, but it was not until the invention of Bitcoin that it started gaining use.

Blockchains and Cryptos

When it comes to the use of blockchain, it is most often applied to cryptocurrency transactions. These digital currencies can be used to purchase services or goods. Unlike paying with traditional payment options, cryptocurrencies use blockchains to create public ledgers and enhanced security systems so that all online transactions are secure and recorded.

Today, there are more than 6700 cryptocurrencies that are being used worldwide and Bitcoin holds the majority of the value. These forms of currency gave become very popular in the past few years. Since blockchain security prevents theft and hacking, it is almost impossible for cryptocurrencies to be stolen. This technology also allows for crypto to be sent anywhere in the world with no need for currency exchanges or any interference from banks.

There are four key concepts that are used with blockchain technology:

• Shared Ledger – this is a distributed system of shared records within a business network and transactions are recorded once, eliminating any chance of duplicate transactions.
• Permissions – These ensure that all transactions are 100% safe, verifiable, and authenticated.
• Smart Contracts – This is an agreement of a specific set of rules that will be used when making any transaction. It is stored on the blockchain and will be automatically executed.
• Consensus – This means that all parties agree to the transaction. Some consensus mechanisms used include practical Byzantine fault tolerance, multi-signatures, and proof of stake.

Other Uses

Invented by Nakamoto, the developer of Bitcoin, blockchain technology continues to expand into many other industries. While it is largely confined to recording crypto transactions, there are certain proponents that are being tested and developed for use in other fields. These include:

• Monitoring supply chains
• Digital IDs
• Data Sharing
• Healthcare
• Network Management

Blockchain provides some great business benefits as well as it completely removed the chances of tampering and also offers time savings, cost savings, and the best possible security measures today.