Wednesday, September 27, 2023

How do blockchains work? – What?

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Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

Blockchains are a relatively new technology that allows information to be stored securely. Usually, blockchains store records of cryptocurrency transactions. The revolutionary aspect of blockchains is that they are incredibly secure without third-party supervision.

If you buy a cryptocurrency on a stock exchange, you used a blockchain. In the simplest terms, blockchains are ledgers that allow the public to see every transaction. The information that makes up the chain is stored in digital “blocks”, which cannot be changed once they have reached their data limit.

Once the block is filled, it is linked to previous blocks in the chain. It will be time-stamped and become a permanent part of the blockchain. As more and more blocks are added to the chain, the older blocks become more and more secure.

What does a blockchain secure?

So why is a blockchain more secure than other data storage systems? The reason is that the ledger itself is a public document that no actor can modify. If one company owns all forms of a transaction, all that data can be lost if one thing goes wrong. However, a blockchain distributes the knowledge of transactions or contracts across multiple nodes. In the case of most cryptocurrenciesMillions of nodes keep a record of every single transaction that happens on the network. So if someone wants to change the ledger, it is immediately corrected by the millions of other nodes pointing to each other at the same time. For this reason, blockchains are precious technology for currency, legal contracts, inventory or other indispensable assets.

When it comes to spending cryptocurrency on a blockchain, anyone in the world can access the records. Even if you don’t own any currency in the chain, you can still look up transactions. However, only the nodes in the chain update and confirm transactions. This transparency means that every transaction can be tracked and every cryptocurrency in existence is publicly known. Even if you lose the passphrase that gives you access to your cryptocurrency, you can still see the record of the past transactions. If a trading site is hacked and currency is stolen, the stolen currency can still be traced. Once the thief spends or moves the money, it can be traced on the blockchain. That makes it very difficult for illegal activity if someone is willing to trace the transactions.

Although the transactions are public records, the people who issue cryptocurrency are still anonymous. The transactions are encrypted with a public-private key. However, because the transactions are public, you could find out someone’s identity if you’re willing to search the blockchain and match purchases to someone’s spending habits. This is not an easy task as millions of trades take place every day.

Blockchains are an almost impenetrable way to keep track of digital contracts. The larger a blockchain, the more secure it becomes. As long as you keep your passcode in a safe place, you don’t have to worry about someone stealing your cryptocurrency or digital assets.

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