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July 26, 2023 Cryptocurrency

Blockchain: What It Is & How It Works

What Is A Blockchain?

A blockchain is a public ledger of transactions maintained and verified by a decentralized, peer-to-peer network of computers. The computers work together to confirm that new transactions are valid through different “consensus mechanisms” that vary.

Each computer in a blockchain network maintains its copy of the shared record, making it impossible for a single computer to alter past transactions or for malicious actors to overwhelm the network.

Genuinely decentralized blockchains do not rely on centralized authorities or intermediaries in order to transact globally, securely, verifiably, and quickly, making technology like cryptocurrency possible.

The online community can exchange a newly created coin like physical currency. The community validates the blockchain to record every transaction ever made with the currency. People can openly share that information and agree on the amount of money sent or received without needing an intermediary.

One long, public ledger stores the data on the blockchain. The newest block contains the details of each transaction. When the block reaches a designated amount of data, it is complete. Hash creates the unique code once complete.

Every transaction relies on an algorithm that relies on past transactions. The system gets even more secure and difficult to break as time passes. This encryption is part of what makes cryptocurrency and blockchain so secure.

How Does Blockchain Encryption Work?

Cryptocurrency and blockchain work as a result of cryptography, which involves encryption.

Encryption is the process of converting plaintext to ciphertext and back to safeguard data and systems, making it impossible for unauthorized parties to access encrypted data.

Blockchain encryption aims to prevent sensitive data like coin balances and transactions from falling into the wrong hands and being abused, falsified, or stolen.

To add a piece of data, the encryption security system known as blockchain must first verify it through an algorithm-based process.

This encryption system guarantees that security measures are implemented before being stored.

Encryption relies on this algorithm, in addition to passwords and keys needed to decode information, to render original data unreadable. The procedure turns the original information and data into plaintext, an alternate text that enables encryption and security.

Authorized persons may decrypt it using a key when they want to access or read the data. This then converts the encrypted text to plaintext just for them.

What Makes It Different?

Many believers in this technology believe it may change many aspects of global commerce. It can make payments, foreign trade, and transfers of value more efficient than traditional systems.

Many processes can be done in less time for less money by cutting out the need for middlemen.

Key Takeaways

Blockchain is a type of shared database that stores information differently than a typical database.

Cryptography links the blocks together, storing the information within them.

Transactions have been the most common use for blockchain as they serve as a ledger. Various types of information can be stored on a blockchain.

Once someone enters data into a decentralized blockchain, the system permanently records all transactions and makes them viewable to anyone.