New Delhi | Talibuddin Khan: Cryptocurrencies have recently been the talk of the town with many countries looking to launch their own digital currencies while many other countries are already using their own cryptocurrencies – Bitcoin, Ethereum, Cardano, and Litecoin – to purchase any good or service. In India, in February the government announced the launch of its own digital currency – the Central Bank Digital Currency (CBDC) – to boost the digital economy. The Indian digital currency will be issued by its Federal Reserve Bank and will be exchangeable for physical currency.
However, cryptocurrency is not the only thing that has caught the attention of trading experts and investors, blockchain technology has made its mark equally. Even if we look at the definition of cryptocurrency, “a cryptocurrency is a tradable digital asset or a digital form of money, built on blockchain technology found only on the Internet” – we will find the term blockchain. For any crypto exchange, blockchain technology is the most important thing because it provides “validity for every cryptocurrency”. It is an ever-growing list of records, called blocks, that are linked and secured using cryptography. Once registered, the data in any particular block cannot be changed.
Let’s know more about blockchain technology:
What is blockchain technology?
Blockchain technology is a digital and decentralized digital ledger (DLT) technology that maintains a path of digital transactions, also known as a block, to the public in several databases, known as a chain, in a network connected through peer-to-peer nodes. As a database, the blockchain stores information electronically in digital formats.
Each transaction in this ledger is authorized by the digital signature of the owner, which authenticates the transaction and protects it from tampering. The cool angle is that anyone can see the data, but they can’t spoil it.
This technology is called a blockchain because it creates a block in each transaction that acts as a chain where each block is added in chronological order. The new block may contain a link to the previous block. Acting like a banking system where every account activity is recorded, the blockchain will shape the bank’s financial transactions throughout its history and the block will be an individual bank statement.
How does blockchain technology work?
The main purpose of its technology was to timestamp digital documents so that they could not be tampered with. When someone requests a transaction (including contracts, records, currency, etc.), it goes to a P2P network consisting of computers known as nodes. These nodes validate the transaction and user status using algorithms.
Once the transaction is verified, it is added to the ledger. This means that a new block is added to the blockchain in such a way that it cannot be changed, and the transaction is now complete. To sum it up, Blockchain users use cryptographic keys to perform various types of digital interactions over a peer-to-peer network.
Different types of blockchain networks:
Private Blockchain Networks: Private blockchains operate on closed networks, and tend to work well with private companies and organizations.
Public Blockchain Networks: Bitcoin and other cryptocurrencies originated on public blockchain networks. It also helped popularize distributed ledger technology (DLT).
Allowed Blockchain Networks: Also known as hybrid blockchains, authorized blockchain networks are private blockchains that allow private access for authorized individuals.
Blockchain Consortium: A blockchain network consortium is similar to a licensed blockchain network. A consortium blockchain has both public and private components, with the exception of multiple organizations that will operate a single consortium blockchain network.
Posted by:
Olok Sincherma
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