In this new age of technology, a lot of innovations and developments happened and are still happening around us, electric cars, facial recognition security for mobile phones, digital currency and more. Related to both technology and finance, cryptocurrency is the first to its game.
We have been living on a centralised and traditional financial system longer than we can imagine. Each of our transactions is being recorded and monitored by national banks and financial institutions. However, with cryptocurrency, blockchain is the system used for every sending, receiving, trading and even when it is used to purchase something.
A blockchain purveyor of its kind secures and stores information in a database. From the name itself, blockchain got its name over time since every transaction made a block of data that are chained together using complex mathematical solutions. It is what makes it secure and hard to hack since no one can rewrite the recorded transactions. This kind of database is far from what traditional banks used to keep their financial records, so traditional banks usually have a centralised database to track their customer’s accounts. However, for cryptocurrency’s database, a ledger is updated by a community with a certain program that is part of the crypto system, and since it is not centralised even if one of the computers get hacked or wouldn’t function, others can still continue on running the database.
Why is there a need?
Even for those who have very complex databases that run a supply chain and have global intermediaries, just the slightest gap can bring up a lot of errors in the system and operations. Once there is a gap in a certain database, there would be a need to reboot everything that would require a re-run on its software and systems that are connected to it, including merchants, financial institutions and other middlemen to get on the same page. To say everyone would be highly affected even on a small gap, which is something we all are trying to avoid. That gap is what blockchain is greatly solving using sophisticated math. On running a blockchain, everything is transparent, and it is designed not to maintain a centralised ledger. Every run on a computer would be identical and updated at the same time in which the history is impossible to change. With that, leaders can rapidly identify the possible risks that can cause gaps in the system.
Blockchain can be used with other things and not just virtual currency. In fact, it caught governments and even private company’s attention because of the security they can have with it. According to Forbes, it is reported that some hospitals in the United Kingdom have used blockchain to have a transparent file and status for their Covid-19 vaccines. It is also where they update their shipment, distribution and administration. It is also now being used in the food industry to manage transparency and traceability of its supply. Well, in fact, starting in 2009, Walmart and Sam’s club required their suppliers to use blockchain to disseminate transparent information among the supply chain.
Blockchain’s Impact on Cryptocurrency
The first version of the blockchain to be invented was Blockchain 1.0. It is the ledger system that made the first cryptocurrency, Bitcoin, possible for sending and receiving such. However, by that time, no one had enough computer power to run algorithms. On Blockchain 2.0, the second version to be developed in 2015, the same time Ethereum was introduced. Improvements were notable in the second version. Also, Ethereum had a Proof of Stake algorithm. Far from the first version, mining was made easier on this one and would not require heavy computational power. The least contributors can do stake their coin and earn from how much they contribute. Lastly, Blockchain 3.0, which was developed in 2018, ended the inconveniences of the first two versions. Like how the second version can only handle 14 transactions per second now on Blockchain 3.0, it can handle up to 100k transactions per second. It also came with new features. One notable improvement is the DPoS or Delegated Proof of Stake, which allows developers on the crypto system to decide what happens on the blockchain.
Process and Structure
Cryptocurrency usually does not stay in one place, especially now that one can easily send and receive cryptocurrency from anyone around the world. Whenever a new transaction is entered, it is then transmitted on the system, which is in real-time validated by a network of peer to peer computers located in different parts of the world. Once the network of computers receives the data, they process it and solve complicated equations as well to validate the transaction. After doing so, it will be validated to be a legitimate transaction, it is time the data will be grouped together into blocks, and then right after, those blocks will be chained together to create a history of transaction that will be permanent on the history. Once recorded, it cannot be changed or altered by anyone since all that process is transparent to everyone who completed a transaction from sender to receiver. If you trust blockchain’s process and security, you should definitely try trading now with Bitcoin Profit.
Who are the people that run blockchain?
In the early ages that blockchain was introduced to cryptocurrency, still, the founder of the very first cryptocurrency, the anonymous Satoshi Nakamoto, introduced a white paper to developers which included a model to the system of blockchain. In the first few years, there were not many volunteers in the community although those volunteers will be rewarded based on their contributions,!that time it was still hard to find a strong computer that could handle the blockchain system, by that time, what they get is also Bitcoin in which the process is now called mining. Now, everyone is free to participate in mining, provided that you have the right tool and knowledge about the cryptosystem.
Would blockchain solve all the transactions for cryptocurrency? As of now, no one knows the exact thing that blockchain would take us. On wild thought, there is also a possibility that we continue transacting cryptocurrency without the need for blockchain.
This article does not necessarily reflect the opinions of the editors or the management of EconoTimes
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