Moreover, the transactions are in the form of unique codes and secured by cryptography principles. Cryptography allows the transactions such as creation, change of ownership, etc. to record in various databases through blockchains. But these blockchains can be public or private.
If it is public, anyone can write the list of transactions and it doesn’t have any gatekeepers to approve or reject the parties. Whereas, If it is private, then the allowed gatekeepers have full authority to approve or reject parties to carry out any transactions. For example: Bitcoin and Etherum belong to the public blockchains.
How does Blockchain technology works?
At first, the term “Blockchain” looks very hard to figure out, this is why most of us don’t attempt to know about it. But, it’s easy to know about it as it is simply managed by software running on computers that communicate with each other forming a network.
The following tasks have been performed by the network:-
- Connect with other members in the network
- Download the blockchain from other participants
- Store the blockchain
- Search for the new transactions
- Validate and store those transactions
These Blockchain stores data in batches called blocks. Each block is like a page of a digital ledger or record book to form a stable linked line in a sequential way.
Each block consist of three elements:
- DATA: A block’s data contains the details about the transaction including sender, receiver, number of coins, and so on.
- HASH: A hash in the blockchain is something like a fingerprint or signature which is unique in nature.
- HASH OF THE PREVIOUS BLOCK: The last element makes a blockchain become secure.
What is Cryptocurrency Mining?
Mining is the process to create the blocks through computer hardware, chips, and designed software. The proportion of mined blocks is roughly equal to the hashing power. The mining requires special-purpose chips called ASICS to solve problems for the validity of transactions in the blockchain network. Miners solve the problems to receive the created cryptocurrencies (such as Bitcoins) and transaction fees.
Benefits of cryptocurrency
Cryptocurrency is capable to solve the problems that are important for the rise in the economy. These are:-
- REDUCING CORRUPTION: Crypto is not under the power of a single entity or person. Although, many people or members over the network have distributed power to avoid the use of “power abuse” by a single person which finally results in no corruption.
- ELIMINATE MONEY PRINTING: The government authorized the banks to print money and this becomes extreme when the economy of a nation drops. But the printing of money leads to other problems such as currency devaluation and as a result, inflation increases, and the value of money equals toilet paper. In contrast, digital currency like cryptocurrency doesn’t need printed money to determine its value.
- NO MEDIATORS CONTROL INVOLVED: Not to mention, traditional cash is controlled and regulated by banks and the government. But crypto cannot be governed by any regulatory body and only you can access your crypto for transactions.
- EASY ACCESS TO EVERYONE: It is a fact that a big part of the world doesn’t have easy access to banks. Thus, crypto can solve this problem as anyone can access their funds even through mobile phones.
Thus, it is necessary to know about the risks involved in crypto. These are:-
- HIGHLY VOLATILE: The crypto is highly volatile, in one day you will find a return of 100%, and the very next day it crashes like hell.
- NO REGULATIONS: Since there is no regulation in crypto. Hence, there is risk of theft and it can be claimed illegally by the government. Nevertheless, the government can freeze your account or demonetize the currency anytime.
- CAN BE USE BY CRIMINALS: Indeed, the crypto transactions don’t reveal the person’s identity, which cannot give any data as to if it is being used by a criminal or a citizen.