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What Is Blockchain And How Does It Work

The blockchain is the base of the cryptocurrency system, having a strong understanding of this system will be a good skill when you enter the world of investing and trading.

Even though this technology was found in the 1980s it was not put to good use until 2008. This is when Satoshi used it to design the new technology block creating the bitcoin system. This is the base of decentralized currency or cryptocurrency.

It works as a decentralized database and acts as a ledger for each transaction. It made the system secure and kept it away from hackers disrupting the code and the system. When a transaction takes place, the ledger stores the unique data related to that particular transaction in a particular section of the blockchain. Once a new block is introduced, the blockchain verifies the data and makes it available for the chain to be linked. The block acts as the record of each transaction that passes through the chain.

A block consists of a large number of information regarding the transactions including all your transactions. As you make a new transaction, it is also added to the blockchain with other information. Even though each individual will have their own blocks stored with their transactions, it will be linked to the whole system of blockchains so that the individual is secure and can not be traced back individually with their transactions. This part makes the transactions secure and private, keeping the transactions open for verification.

This is where the miners come into play. The miners verify each transaction in the hash and encode them during the process to make them safe from malicious hackers. As they are verifying and maintaining the system, they are rewarded with bitcoins. Read about Bitcoin mining and trading on arbitrage trading system.

Now, let us continue the blockchain exploration and understand its basics. So we have understood that blockchains are the basis of the bitcoin system, they store each transaction but are encoded by verification. Miners are responsible for encoding hashes during the process of mining. This gives it extra security.

There have been a lot of questions about someone hacking into the system. It is possible but it will require a lot of resources and they need to access the genesis block created by Satoshi to make this hack work. That is impossible with the infrastructure available to any hacker today as all the block chains are added to the genesis block which in turn means that the hackers need to hack each individual block (Billions in number) to reach the genesis block before they can hack the entire system.

Unlike traditional banking or financial systems, bitcoin is based on a technology system and this is why a lot of people invest their hard-earned money in this is system even though there is a lot of negative talk about bitcoins and cryptocurrencies.

Eric
Eric
Eric Desiree is a graduate of Bachelor of Arts in Communication. He started his career as a Public Relations Officer in a law firm in Los Angeles California. Currently, he is the managing editor of ANCPR.