BLOCKCHAIN TECHNOLOGY; THE TRANSPARENCY OF CRYPTOCURRENCY
We can trace the influx into cryptocurrency to its transparency. When we decide to put our trust in people, it is mostly on the basis of transparency; these people are open to us. They are not hiding anything from us or in the words of the famous singer, John Legend, they are showing us all their cards. It is the same for cryptocurrency but in this case the cards are all the transactions made on the network. This transparency is achieved through what is known as blockchain technology.
Blockchain technology can be accorded to Satoshi Nakamoto who used it in the creation of the popular cryptocurrency; bitcoin. Blockchain can be defined as a digital ledger, in the sense that it keeps a record of transactions. The chain is the record book (the ledger) and the blocks imputed timely are the transactions that occurred. Unlike the traditional ledger that is accessible to the owner of the account and the bank, making it centralized, blockchain is made visible for everyone on the network. Therefore, blockchain is a public record of transactions that is shared in a network amongst connected users.
A block in a chain is made up of three parts. They are; the data, hash and the hash of the previous block. The data is what the block contains. For example, the data of a block on bitcoin contains the summary of a transaction; the sender and receiver’s information alongside the amount that was sent. A hash is like an encryption, it is the security of the block. Once a block is created, a hash is calculated for it. This hash appears in 1s and 0s, it is a binary system. Lastly, the hash of the previous block. This feature makes for the interconnectedness of the blocks because a block carries the hash of its preceding block, changing the hash of that block makes the blockchain invalid. This is one of the reasons why a blockchain cannot be counterfeited. Another reason is its public accessibility characteristic. It is hard to tamper with a record when everyone can see any change that occurs. It is important to note that the first block on a chain possesses no precedent hash as it is the genesis block.
For a blockchain to exist, four elements have to live and breath. These elements are as follows; peer to peer network, cryptography, consensus algorithm, punishment and reward. There will be no blockchain to begin with if there are no set of computers called nodes that are interconnected. Joining this network is by owning or having access to a node. It is open to everyone. The second element is cryptography which acts as the security system of the blockchain. The consensus algorithm displays the decentralization of the blockchain technology. Users must come into an agreement before a new block is added. Finally, punishment and reward; punishment is handed out to anyone who breaks the rules and rewards are given to abiding users in form of coins or tokens.
The transparency of blockchain technology is the forefront benefit of this structure but there are other benefits and they include: decentralization; the possibility of power trip is avoided as power is distributed amongst users, improved security and privacy, speed; this is made possible because of the elimination of a middle man, immutability which means the ability to alter the transactions on the blockchain is eliminated etc.
Is blockchain technology the future of transactions? Well, we can say that it has the potential of revolutionizing transactions as we know it. It is safe, efficient and more people are using it every day. The world is run on the opinions of the majority so blockchain technology could be the future of transactions.
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