We continue the series of introductory posts and want to talk about what blockchain is and why this technology has become the basis for all cryptocurrencies.
Blockchain is a new database format, it is presented as a chain of blocks composed in a certain sequence. Each block has a unique value that contains the hash (label) of the given block and the hash of the block in front of it. This seemingly simple system has a powerful cryptographic effect, since when any of the blocks change, the entire chain ceases to be valid, which immediately detects a hacking attempt.
Another name for blockchain is distributed ledger technology, because its blockchain is not stored somewhere in one place, but its stored by all participants in the process. Accordingly, each block added to the chain is verified by each participant, which makes the system invulnerable when one or more users are hacked. One of the key factors of the blockchain network is decentralization, it ensures its transparency, eliminates the risk of any manipulation or data fraud.
Decentralization, speed of data processing and security against hacking have helped blockchain technology to become the basis for all modern cryptocurrencies, starting with bitcoin. The blockchain allows users to exchange any data (including payments) with each other without the participation of third parties: quickly, anonymously and encrypted, but, at the same time, absolutely transparent.
The blockchain is suitable for performing transactions not only with cryptocurrencies, but also with any other assets: stocks, gold, real estate rights, any tokens, etc. Transactions through the blockchain are conducted confidentially and with a minimum commission, which goes to miners – the owners of computing devices that support the network. The technology guarantees absolute reliability of transactions and protection of their participants from fraud, since all information about them fits into the block chain and it is impossible to delete / change it in any way.