It is very possible that you have heard of Bitcoin or cryptocurrencies – maybe even invested some time or money into cryptocurrency mining. Cryptocurrencies are digital currencies, which you can send to anyone in the world without having to go through a bank or other central authority.
While cryptocurrency is often thought of as Bitcoin by most people, it actually allows for more than just the transfer of currency. A cryptocurrency is not simply a money system, but it can be anything and everything – from a company to a country.
Most cryptocurrencies are based on an underlying technology known as the blockchain. Blockchain was originally developed in 2008 by Satoshi Nakamoto to support Bitcoin, however, since then has been used for many other purposes including the transfer of money, land/property transfers, gambling, crowdfunding, and even voting.
Many people argue that blockchain will be as important to the future as the internet has been to our present day. So what is this magic behind cryptocurrencies? How can it have so many uses? What is this “blockchain” everybody talks about?
What is Blockchain Technology?
The blockchain is basically an enormous public ledger book that contains records of every transaction between parties in the system. The “ledger” (or list) is made up of blocks, which are linked to each other using cryptography, hence the term “blockchain”. Because there is no centralized authority in this system, everyone needs to solve cryptographic math problems to ensure that the system is run fairly and everyone involved in the transaction can be verified.
The cryptography behind blockchain ensures that once a transaction has been recorded in a block, it cannot be changed or removed by anyone else who might want to change it. For example, if you were to try and change a past purchase made on your credit card, the bank might be able to reverse the change.
In the blockchain, someone trying to change a past transaction would need to solve those cryptographic problems all over again because each block is linked together using cryptography, and changing one of the blocks will also change an entire chain.
How Blockchain Supports Crypto Trading
The blockchain is used to support cryptocurrencies by creating a decentralized system of trust. This ensures that everyone involved in the crypto transactions is real, and nobody can take advantage of others without being found out fairly quickly. The same system applies to all transactions on Bitcoin Up.
One example of how this decentralized public ledger works is through cryptocurrency mining – which you have probably heard about already if you have ever done any crypto mining. Miners are people who use their computer power to solve these cryptographic problems so they can add more transactions to the blockchain for cryptocurrencies like Bitcoin and Ethereum.
Miners usually get paid a small fee for adding new blocks to the ledger, which is why some crypto miners might even set up multiple computers or join mining pools (groups of miners) to have a chance of earning cryptocurrency more quickly.
There are many benefits of using blockchain technology, with one being that you do not need to trust anyone when it comes to crypto transactions – this is because there is nobody in charge. You can send money between any two parties worldwide without having to rely on another third party for your transaction. You can also transact anonymously, which is an important privacy factor for many crypto users.
Cryptography is a security system that is used to keep your money safe from criminals, and you as the user in control of how it is spent. Many people have lost their money by giving away their private key (or password) to someone who should not have had access to it.