Daily Times

Over the past years, the consistent rise in the Bitcoin price USD even after market volatility has caught the public’s attention. As a result, the underlying blockchain technology has come into the spotlight. However, while blockchain has gained prevalence in the financial and technological sectors, it still remains a mystery to many.

In this article, we explain what blockchain technology is, outline its key features, and discuss its working mechanism.

What Is Blockchain Technology?

Blockchain technology is not Bitcoin but rather the technology behind this cryptocurrency. A blockchain data is a distributed digital transactions ledger that is shared among a computer system’s network nodes. Being a decentralized database, a blockchain stores information and electronically records it in a digital block format, making it hard to hack, change, or compromise.

The technology represents a shift from traditional centralized data storage to a decentralized system that gives every participant access to their own copy of the whole ledger. In addition to improving transparency, this significantly enhances security. Since every block is connected using principles and spread across nodes, altering, or tampering with the information would require a lot of computational power.

How Does Blockchain Technology Work?

Understanding the working mechanism of the blockchain is essential as its use today goes beyond cryptocurrency. The technology manages transactions within the Bitcoin network by combining cryptographic keys, a peer-to-peer network with a shared ledger and computational algorithms.

Cryptography is an essential aspect of blockchain’s functionality. Each user on the network has both a private and public key. The keys work in unison to develop an identity that establishes security and trust within the network. In cryptocurrency, this is known as a digital signature, and it works to authorize and secure transactions.

Blockchain’s transaction validation process is another of its distinctive aspects. Network participants utilize digital signatures to verify every transaction. Upon verification, a transaction is compiled into a block, and in addition, its data is broadcast to all nodes in the network. Next, the nodes validate the block and it is added to the chain in chronological order. This way, the integrity and transparency of each transaction are guaranteed.

A block in the blockchain technology is a combination of three major components:

• The header: This one contains metadata such as timestamp, which bears a randomized number utilized in the mining process.
• The data section: Here’s where you can find the main information such as smart contracts and transactions.
• The hash: This is a unique cryptographic value that is representative of the whole block. It is utilized for verification purposes.

Key Features of Blockchain Technology

Here are some of the key features of Blockchain technology:

Decentralization

Centralized systems are dependent on a single point of control which can make them susceptible to manipulation, downtime, or hacking. Blockchain on the other hand utilizes a decentralized network, with its participants taking part in the control and decision-making. The result? Enhanced security, reduced risk of data breaches, and elimination of intermediaries.

Immutability

Once there is a record of a transaction, it becomes extremely hard to alter or erase. Every block is assigned a unique code called a cryptographic hash, which is generated based on the information contained in the block and the preceding block’s hash. An attempt to make modifications would require you to alter the hash of all previous blocks, a nearly impossible feat.

Transparency and Security

Transactions on blockchain undergo a verification process called ‘consensus.’ Here, network participants discuss and agree on the transaction’s validity before they are included in the ledger. Consensus ensures that only legitimate transactions are recorded, lessening the risk of fraud and unauthorized activities.

Openness

The blockchain technology’s openness makes it accessible to anyone wishing to be part of the network. This means that anyone can join the network, validate transactions, and add new blocks provided they are familiar with the consensus rules. Openness promotes transparency, innovation, and inclusivity as it allows equal participation from several stakeholders.