All About Blockchain Technology And How It Works

The thought of blockchain technology pops up in one’s head naturally whenever one hears about cryptocurrencies such as Bitcoin. It is of vital importance to virtual currencies, to the extent that the latter would not exist without the former.

From humble beginnings as an idea with regard to computer science at the initial stages – primarily in connection with data structures and cryptography – the technology has come a long way to gain in popularity. Its origin dates back to the conceptualisation of Merkle tree conceptualized in 1979 by Ralph Merkle. The Merkle tree was mainly used to build a protected chain of blocks wherein the data records are connected to one another.

However, the blockchain we are familiar with was born after the foundation of distributed blockchain which involved the protected details of data exchanges and the use of a peer-to-peer network for verification of each exchange in a decentralised manner. This approach led to the foundation of Bitcoin.

How Blockchain Works

The entire process of blockchain technology can be broken down into three key steps. These are as follows:

• Blockchain monitors and stores information about every individual data exchange. The record, thus resulting out of it is called ledger in the world of cryptocurrency. In layman’s language, a data exchange refers to a transaction. Every time a transaction takes place, it is added to a ledger in the form of a block.
• Next, blockchain uses a shared system to establish the validity of every transaction.
• After sign up and verification, a transaction is recorded to the blockchain. Once added, it cannot be changed thereafter.

 A set of cryptographic keys provides blockchain users with two kinds of keys – private key and public key. In combination, they constitute a digital signature. While the public key assists in the identification of a user, the private key empowers users to sign and authorise various actions digitally in collaboration with the public key.

In simple terms, this means that the public key represents the wallet address of a user, whereas their private key provides them with an access to withdrawals, transfers and other actions related to digital currency.

Thus, it is important to ensure the safety of the private key as it can be used in combination with the public key to gain digital access to a user’s account and control it.