What’s a Blockchain?

Published on: 10 Apr 22:09

Cryptocurrency is steadily gathering steam as more and more people are recognizing the benefits of a digital currency with no central management system. Existing on blockchain technology, cryptocurrency works because transactions are made and verified using an independent system. Miners verify transactions, which are then accepted by everyone and added to the blockchain. But what is a blockchain? How does cryptocurrency work? cDuel offers an online cryptocurrency trading simulator game, which gives you the opportunity to learn cryptocurrency trading in a safe environment. Sign up for your free account today!

WHAT’S A BLOCKCHAIN?

It’s important to keep in mind the difference between cryptocurrency and blockchain. Cryptocurrency is the actual digital currency that can be traded. Blockchains are the mechanism by which cryptocurrency can be traded. It’s the difference between the dollar bill and the bank or transaction ledger you use to keep track of such things. In other words, a blockchain enables the transactions of the cryptocurrency. Cryptocurrencies cannot exist without blockchains, which is why they are frequently mentioned together and why they cause such confusion.

Blockchains record records (or transactions when speaking of cryptocurrency), called blocks, which are linked using cryptography, which is code that is kept secret. Cryptography converts data into a format that is unreadable for an unauthorized user, and is readable by an authorized user with the key. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. Once the block has been verified by the miner (or node) it can be added to the blockchain for a permanent record of the transaction. Blockchains were invented in 2008 by Satoshi Nakamoto, for the purpose of cryptocurrency trading.

WHERE CAN BLOCKCHAINS BE FOUND?

Pioneered by cryptocurrency, the blockchain is now being used for other means. But what makes blockchains so special?

HOW DO BLOCKCHAINS WORK?

The best analogy for a blockchain is a spreadsheet that exists on Google Sheets that is available to anyone. Thus, when new blocks (or transactions for cryptocurrencies that are stored as blocks) are added, anyone can add it and everyone has access. However, you cannot make changes once blocks are added to the blockchain.

WHERE COULD WE SEE BLOCKCHAINS IN THE FUTURE?

Blockchain technology has the potential to revolutionize society as much as machines did. It would bring the highest level of accountability, with virtually no human error or even machine errors. Having transactions recorded in one register that all users have access to and are validated through third-party sources that all accept is the beauty of blockchains.

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