The Concept of Blockchain: Facts You Need to Know
Like most cryptocurrencies that came after it, Bitcoin relies on the blockchain technology to complete its secure transactions. The blockchain represents a public ledger where all transactions are recorded for everyone to see. The transactions are written to the blockchain by miners.
Cryptocurrency transactions take place directly between two individuals instead of following a typical channel through banks. Whenever a person needs to make a transaction with these digital currencies, he/she simply need to transfer funds stored in his crypto wallet to the wallet of another person. This transaction between two persons is noted on the digital ledger, namely the blockchain. Each cryptocurrency will generally have its own blockchain, and under some types of mining, miner’s computers perform lengthy calculations to maintain and update all new entries to the ledger.
When a specific number of transactions occur on a cryptocurrency’s network; the complex algorithms on a computer group the transactions into a block. The formation of this block and addition of all blockchain transactions, including the monetary reward given to miners, is completed with the help of complex mathematical formulas that are named as cryptographic functions in the digital world.
In real terms, solving a cryptographic equation resembles throwing a pumpkin off a building to showcase the specific splatter pattern. In order to match the splatter pattern and to transfer the block, people need to toss the pumpkin many times until the exact splatter pattern is found. The same concept is used in “Proof-of-Work” cryptocurrency mining, whereby a computer will attempt to solve a complex math problem through “brute force” to identify the winning pumpkin with accurate splatter to validate the target block.
Whenever a computer solves the complicated math problem and successfully adds the transaction block to the blockchain, it receives a monetary reward. This process is referred to as mining cryptocurrency.
Bitcoin was the first cryptocurrency to introduce the concept of an “immutable public ledger”. This notion has changed the perspective of many on whether or not it is necessary to rely on a central banking entity. Many coins have since developed their own form of mining and have made their own tweaks to their blockchain. The possibilities are endless for the development and implementation of this revolutionary technology.