After a decade-long journey, cryptocurrency exploded into huge prominence this year. Many people joined the market and some even became cryptocurrency millionaires in just a few months. Others took longer. With billions of dollars being transacted online regularly, a detailed discussion on the technology on which the crypto world runs is somewhat lost. As the volatile market appears to be gearing up for another rally, it's a good time to know where the investments go and how the transactions are stored. At the centre of cryptocurrency is a digital ledger technology called blockchain, described as a decentralised system.
Blockchain and cryptocurrency
In simple terms, blockchain is a database of all crypto transactions done anywhere in the world at any time. It's a system of storing information in a way that makes it nearly impossible to change, hack, or cheat the system. A public ledger, blockchain distributes the information of all crypto transactions across the network of all connected computers, so that everyone can view the data, including crypto mining and trading. It does not have a central control or single authority.
It's more complex than a traditional database created and maintained by a central authority, but blockchains are more secure as no individual or entity can access the data without the appropriate cryptographic private key, or without the owner's permission.
The interesting idea was developed before the crypto coins came into existence, but Bitcoin's popularity after it came into existence in 2009 skyrocketed it into the mainstream. While blockchain technology can be used to store any kind of data, like medical and health information, it is being widely used for trading in cryptocurrency currently.
How does blockchain operate?
In blockchains, the data is stored in blocks that are bound by a chain. When a new set of data comes it is entered into a fresh block. Once that block is filled it is chained onto the previous block. This makes the data chained together in chronological order. Every block in the chain contains data of several transactions.
Take the example of a spreadsheet. It also contains data but it is designed for one person or a small group of people who can access or manipulate it. A database can store a large quantity of information that can be accessed by many users at the same time. However, these are often owned by an individual or entity which has complete control over them. But the blockchain is – as said earlier – decentralised and not owned by any one person or entity. This feature makes it more secure and trustworthy.