Blockchain and cryptocurrencies are not as complicated like how other people describe it.
The blockchain technology is literally making things faster and safer for any of its known application, from its original use of Bitcoin to literally anything one can think of.
Much like the Internet, blockchain ensures Durability with its own built-in robustness. By keeping records (blocks of information) that are identical across its P2P network, the blockchain has no single point of failure and cannot be controlled by a single entity.
So, to put it simply, as told by Don & Alex Tapscott, authors Blockchain Revolution (2016).
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
The easiest way to put it would be, think of an excel spreadsheet, that is continuously being duplicated a thousand of times, every second, across a network of computing devices (basically a P2P network). Then this P2P network automatically and regularly updates this spreadsheet, while ensuring the data entered in it cannot be changed but is continuously reconciled and shared across the network.
That is basically how the blockchain technology works.
So, how does the blockchain technology works? Let me discuss it to you step by step in the easiest possible way, so every person who reads this article, understands it.
REQUEST: Someone over the Internet requests a transaction.
BROADCAST: The requested transaction is broadcast to a P2P network consisting of computers, basically known as nodes.
VALIDATION: The network of nodes then validates the transaction and the user’s status using known algorithms.
VERIFICATION: The transaction is then verified.
So, in the case of a cryptocurrency transaction, such as Bitcoin, which is originally the intended use of blockchain, have:
- NO INTRINSIC VALUE: which means it is not redeemable for another commodity such as gold.
- NO PHYSICAL FORM: Is only available in the P2P Network.
- NOT DETERMINED BY A CENTRAL BANK: The network is completely decentralized; thus, it is not controlled by a single entity or corporation.
VERIFIED: Once a transaction is verified, it is combined with other transactions in the network to create a new block of data for the ledger.
ADDED: The new block is then added to the chain (hence the name blockchain) or blockchain, in a way that is permanent and cannot be changed by anything at all, making this technology ultimately very secure.
COMPLETED: The transaction is then completed at this point.
So, those are the steps showing how the blockchain technology works. I hope that this article has somehow helped you know more a little bit about this revolutionary technology.