Transactions are made from so-called “wallets” or electronic purses. Wallets are encrypted files that work similarly to a bank account, and they have two keys: public and private.
The public key is an alphanumeric string between 26 and 35 characters. It is the Bitcoin address and acts as the account number. In this way, for someone to send you bitcoins, you must first give them the public key and receive the virtual currencies.
Meanwhile, the private key is used to authorize operations from your wallet. This process is what is known as asymmetric cryptography.
As new transactions are constantly flowing through the network, they will be added to a pool (similar to a cooperative) of unverified transactions. This is where the figure of the so-called “miners” appears, who is in charge of choosing the transactions of these pools to create a new block of confirmed transactions.
The miners are dedicated to verifying the transactions that are happening at the moment. They fulfill two essential functions: To create new bitcoins for each block that is mined and ensure that the transactions are genuine and legitimate.
Mining pools are sets of miners who work together to solve a block and divide the rewards awarded.
Thanks to the use of the blockchain synchronized between the nodes, the irreversibility of the transactions are achieved, which allows no one to commit fraud to benefit, modifying the account book to divert the bitcoins from one place to another without others knowing.
This ledger is safe because the linked blocks have a “hash” (coded) pointer that links to the previous block; Furthermore, all information is public. This means that although it protects the privacy of its users, it does allow control of the traceability of those transactions.
It should be noted that each block is a part of the chain with the following elements:
An alphanumeric code that links to the previous block. A package of transactions. Another alphanumeric code that will link to the back block. What is the future of the blockchain?
Experts on the subject compare the ‘boom’ of the blockchain with milestones such as the development of the Internet or the integration of computers in-home use. They point out that it is a system that will change the way of understanding business and society.
Likewise, they reveal that one of their maximum potentials will be Smart Contact (smart contracts). With blockchain technology, agreements and transactions can be made securely without revealing confidential information between the two parties. For example: selling products, renting a house, cars, etc., all online.
On the other hand, blockchain will be essential for the Internet of things. Our electronic devices will communicate with each other securely and transparently, say the experts. These smart devices will be able to buy products on the Internet automatically.
Blockchain can be defined as a mathematical structure to store data that is almost impossible to falsify. It is a public e-book that can be shared openly among disparate users and creates an immutable record of your transactions.
Each digital record in the thread is called a block (hence the name), and it allows an open or controlled group of users to participate in the e-book. In turn, each block is linked to a specific participant.
Blockchain can only be updated by consensus among the participants in the system, and when new data is entered, it can never be erased. There is an accurate and verifiable record of every one of the entries made in the system.
The information contained in a blockchain exists as a shared database and is continually reconciled. This is a way of using the network that has obvious benefits.
The blockchain database is not stored in a single location, which means that the records it keeps are truly public and easily verifiable. There is no centralized version of this information for a hacker to corrupt. Hosted by millions of computers simultaneously, your data is accessible to anyone on the Internet.
To clarify what blockchain is, it can be compared to a spreadsheet that has been duplicated thousands of times on a computer network. This network is designed to regularly update the spreadsheet and have a basic understanding of the blockchain.
How blockchains operate
Defined what blockchain is, it is essential to know the advantages that make it the moment’s technology. It is unlikely to be a disruptive input that attacks traditional business models with a menu solution.
Or cost. Instead, it is a fundamental technology that can create new foundations for economic and social systems. These are its main advantages.
You cannot define what blockchain is without talking about security. One of the most significant benefits it brings is its ultra-secure network. Because the transmitted data is inherently encrypted, it is much more secure than the standard username and password system.
Decentralized data stored using blockchain makes it difficult to hack because there is no “single point of failure.” What does this mean? If all documents are stored on thousands of different hard drives, it is unlikely that any data will ever be lost.
Under normal circumstances, to break into a blockchain, hackers would have to overwhelm more than 50% of the network in less time than it takes to create a new block. The amount of computing power required to do this on most blockchain networks is tremendous. The larger ones are much more difficult to hack because they are more decentralized and have more computers to verify transactions.
Furthermore, it is easy to detect when a block has tampered with thanks to hash functions. These values form one block are added to the data in the next. Anyone who tries to tamper with one will end up changing the hash entirely, setting off a red flag, and disabling the lock entirely.
Decentralization and smart contracts
The second benefit comes from decentralization and smart contracts. These use blockchain to automate payments and transfers based on a predetermined set of conditions.
With them, you can pay an electricity bill once the consumption reaches a certain amount. The transaction would be securely sent to the power company and verified using blockchain. Goodbye to late fees and stolen financial information.
As more transactions are automated using smart contracts, the need for third-party intermediaries and organizations will decrease. Because information is spread across the entire network, it is complicated for a group to control it.
Governments and individuals in positions of power will no longer shut down the sources they wish to suppress because the information will exist on many computers across the network.