Blockchain Technology Behind Cryptocurrency
Cryptocurrency is now used by a large audience, which ranges from investors and online gamers to celebrities. Due to their decentralized nature, virtual currencies continue to gain momentum, and new cryptocurrencies appear every day. This abundance of cryptocurrency proves the success of Blockchain, the name of the technology that supports most cryptos.
The first Blockchain was made public in 2009 with Bitcoin. Since then, this technology has been widely exploited to launch other digital currencies, but it also offers possibilities for use in many different industries (healthcare, retail, etc.). But how does Blockchain technology work? The essentials to know about cryptocurrency and Blockchain cryptocurrency and Blockchain technology are intrinsically linked concepts.
Table of Contents
The Principle Of Cryptocurrency
Use virtual currency! The idea might have seemed hilarious, if not unreasonable, too many of us before January 12, 2009. But on that date, an individual calling himself Satoshi Nakamoto created Bitcoin: the first dematerialized currency. The inventor’s goal is to market money that is entirely independent of states and central banks.
Cryptocurrency is presented as an alternative to traditional currencies. It only works via the Internet and allows you to exchange money online. One of the characteristics of virtual currency is that it is decentralized. Therefore, there are no institutions that control it, unlike conventional currencies. Cryptocurrency is used through tokens (virtual tokens).
Blockchain Technology
The functioning of cryptocurrency depends on Blockchain technology. Remember that the latter was also created in 2008, a year before the appearance of Bitcoin, by the same unknown genius. If you use virtual currencies or plan to do so, take an interest in Blockchain related news. Indeed, the more information you have about this technology, the better you can follow cryptocurrency trends.
A Blockchain is a chain of blocks. It is a technology rooted in peer-to-peer (peer-to-peer), that is to say, a public network in which each entity is as much a client as a server. The web is not centralized. Anyone can use it freely. Furthermore, Blockchain and cryptocurrency are interdependent. It is the Blockchain that validates transactions made in virtual currencies.
However, it cannot function without the use of tokens. To validate transactions, members of the peer-to-peer network compete. These are the miners. Each time a transaction is completed, the miner who made it possible is rewarded with transaction fees. Note that miners can also be rewarded when they discover a new crypto unit by solving complex equations using algorithms.
Blockchain Technology And Cryptocurrencies How It Works
Blockchain technology is deployed through applications. The mode of implementation varies from one application to another.
Wallet
The blocks of the Blockchain each contain several transactions. They are part of the Blockchain through the nodes of the network.
- An index
- A hash to identify it
- The hash of the previous block
- A timestamp
- A series of transactions
To connect to a Blockchain and add a new block to it, you have to use a wallet, the software, or the client application that allows you to constitute a Blockchain node. With your wallet, you can synchronize the Blockchain on your connected device.
The technology is decentralized, the Blockchain storage is done everywhere, and each node of the network has a copy. The user has a private key and a public key for his operations. This is called asymmetric cryptography. As for the private key, it is confidential and guarantees the security of the exchanges.
Transaction
When you use a wallet to send tokens to a person, the transaction is sent to the Blockchain. Then, it goes on, waiting for validation. The minors then activate themselves to check the history of the exchanges. Then, using algorithmic techniques, they make sure that the user does have the money they intend to transfer. Finally, the consensus is around the miner who provided the most computing power to determine the new block’s hash.
The hash is the signature of a new block obtained by hashing (a mathematical function allowing converting a series of characters of any length into a string of fixed length characters). When there is a new consensus, the new block is then integrated into the Blockchain. The minor then obtains his remuneration. In addition, his wallet is credited with recently manipulated crypto tokens.
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