Blockchain is the record keeping technology behind the bitcoin network. In the world of banking, investing and cryptocurrency, this technology has become important for keeping strangers honest and consistent. In business, it is necessary to keep several ledgers. Blockchain uses a “chain” of “blocks” to keep those ledgers. Essentially, it is digital information (the “block”) stored in a public database (the “chain”).
Blocks on a blockchain are made up of digital information having 3 basic parts
- Information including date, time and dollar amount of your most recent purchase. (Example Amazon)
- Information about who is participating in the transaction. For example, rather than using your actual name for an Amazon purchase, there would be a unique “digital signature” sort of like a user name.
- A unique “hash” code is included to distinguish one block from another. These “hash” codes contain cryptographic codes created by special algorithms. Even if your purchase is an identical item done at two separate times, the “hash” codes differentiate the two separate purchases.
HOW DOES BLOCKCHAIN WORK?
One block can store around 1 MB of data, so more depending on the size, potentially, thousands of transactions may be stored inside one block. In addition, as you can see, a block chain is a group of blocks connected by a chain. In order for a block to be added to the chain, certain qualifications must be met.
- A transaction must occur
- That transaction must be verified
- Upon verification, the transaction must be stored in a block
- Then the transaction must be given a “hash” Once the transaction is “hashed” the block can be added to the chain.
When a block is added to a Blockchain, it becomes public and anyone can view the contents of that block. Here is where the above mentioned honesty comes in. If you look at bitcoin, for example. You will see that you have access to view transactions. The information regarding when, where and by who that block was added is all available to you.
WHAT ABOUT PRIVACY
The contents can be viewed by anyone, but users can also opt to connect their computers to the blockchain network as nodes. This allows their computer to receive an automatic update whenever a new block is added. Kind of the way Facebook News Feed updates a member when a new status is posted.
Each computer in the network has its own copy of the blockchain. This means that there are thousands. and in the case of Bitcoin, there are millions of copies of the same blockchain. Even though each copy is identical, The spread of that information across so many networks makes it harder to manipulate the information. With blockchain, there isn’t just one, definitive transaction to be manipulated. Instead, if a hacker wanted to be effective, every copy on the network would need to manipulated. That is what is meant by blockchain being a “distributed” ledger.
The benefit of the Bitcoin blockchain, however, is that access to identifying information about the users making transactions is not available. Although transactions on Bitcoin are not 100% anonymous, personal information is limited to their digital signature or username.
BITCOIN
If you are looking to get started with cryptocurrency, you can begin with Coinbase. Here, Bitcoin can be sent to anyone, anywhere in the world. Also, when you refer someone who purchases $100 of cryptocurrency and you will earn $10 of free bitcoin.
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