As a form of digital record-keeping, a blockchain is novel and innovative. Blockchain technology underlies many cryptocurrencies, such as Bitcoin and Ethereum, but its unique method of securely recording and transferring information has broader applications.
Blockchains are registrele distribuite. In distributed ledger technology (DLT), records are kept across multiple computers, known as nodes. Any user of the blockchain can become a node, but it requires a lot of power. The ledger is maintained by nodes that verify, approve, and store data. It differs from traditional record-keeping methods that store data centrally, such as on a computer server.
Information added to a blockchain is organized into blocks or groups of data. In order to form a chain, new blocks must be continuously added to the ledger, since each block can only hold a certain amount of information.
Blocks are identified by their own unique identifier, a cryptographic “hash.” The hash protects the information within a block from anyone without the required code, and also ensures the block’s position along the chain by identifying the block before it.
A cryptographic hash is a collection of numbers and letters that can be up to 64 digits long. It’s that unique code that enables the puzzle pieces to fit together.
Adding information to the blockchain and encrypting it with a hash makes it permanent and unchangeable. Throughout the blockchain, each node has a record of the full timeline of data. The information stored by other nodes would not be altered if someone tampered with or hacked into one computer and manipulated the data. Since the altered record does not match the majority, it can easily be identified and corrected.
With the way the system works, it’s almost impossible for someone to reverse-engineer it and figure out what all those hashes are.
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An example of how blockchain is used to verify and record Bitcoin transactions can be found here. The consumer buys Bitcoin or Ethereum. Using Bitcoin’s decentralized network, transaction data is sent between nodes. The transaction is validated by the nodes.
As soon as a transaction is approved, it is grouped with other transactions to form a block, which is added to an ever-growing chain of transactions. As a result, the completed block is encrypted, and the transaction record on the blockchain is permanent; it cannot be changed or removed.
The blockchain of Bitcoin is public, meaning anyone who owns Bitcoin in their Bitcoin portofel can view the transaction records. Although it can be difficult to trace the identity behind an account, the blockchain record shows which accounts are transacting. Anyone with the required computer power can participate as a node on a public blockchain, approving and recording transactions.
However, not all blockchains are public. Blockchains can be designed as private ledgers, so the owner can limit who can make changes or additions to them. Private blockchains have a smaller pool of participants, but they are still decentralized among participants. Using the same encryption methods as public blockchains, private blockchains maintain the security of any data maintained within the database.
Creating a secure, decentralized permanent record of information is gaining traction across a number of industries, and could potentially address many security concerns, record-keeping issues, and data ownership concerns.
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