Cryptocurrency is here to stay. Approximately 1 in 5 Americans have invested some portion of their money into crypto, giving it more legitimacy than it’s ever had. What makes cryptocurrency so novel is the blockchain technology that backs it up and secures it.
If you’re new to the world of cryptocurrency, then you probably don’t have a solid understanding of blockchain technology. Thankfully, we’ve compiled a handy guide that makes understanding the blockchain much easier. Read on to learn everything you need to know!
What Is the Blockchain?
The first thing you need to know about blockchain is that it is not a form of cryptocurrency. Blockchain is a relatively new form of technology that serves as a digital ledger for a particular piece of cryptocurrency. As the name implies, blockchain is a series of blocks, each representing a specific transaction.
Typically, the information stored in the blocks is of an economic nature. Examples include who previously owned a piece of cryptocurrency, who bought it, and how much they paid for it. That said, any type of information can be stored in individual blocks, it’s not limited to economic details.
How Does the Blockchain Work?
As mentioned in the previous section, the blockchain acts as a sort of ledger of transactions involving cryptocurrency. The problem with traditional ledgers is that they’re easy to manipulate, and it’s easy to lose them. Therefore, they’re less accurate.
Blockchain technology solves this issue through triple-entry bookkeeping. Each transaction is stored on a tamper-proof record that is cryptographically sealed by a third entry.
Essentially, when you purchase cryptocurrency, you pay a fee to confirm the transaction. This fee goes towards miners who solve a mathematical problem referred to as a hash, which stores information about your transaction. Once it’s solved, a new block is added to the network.
While blockchain technology might sound conceptual, you can see it in action when you visit a Bitcoin ATM location. At that time, the money you have in Bitcoin is exchanged into cash, creating another block in the blockchain as ownership changes hands.
Is the Blockchain Secure?
Blockchain is built to be secure. That doesn’t mean that it doesn’t face its fair share of issues. Developers have had plenty of issues with hackers targeting their exchanges and source codes.
The issue is that blockchain has three competing properties, decentralization, security, and scalability. Many developers sacrifice security for the sake of the other two properties. It will take time to find the perfect balance as technology advances.
Understanding the Blockchain Doesn’t Have to Be Difficult!
For newcomers to cryptocurrency, understanding the blockchain sounds like an intimidating task.
In reality, blockchain technology is quite easy to understand, conceptually. With a little research on blockchain and the cryptocurrencies it supports, you’ll soon be ready to start investing. Before you know it, you’ll be reeling in the profits from your cryptocurrency investments!
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