A Quick Guide: How Does The Blockchain Work?
The tech community around the world makes financial transactions over the global Internet using cryptocurrency. After Bitcoin, blockchain is rapidly emerging as a decent option to make online financial transactions easily. In simple words, blockchain technology allows you to make peer-to-peer transactions without any involvement of a bank or a governing body.
A good number of tech-savvy people are still unfamiliar with Blockchain Technology. They don’t know how it works. So, let’s try to know that.
Blockchain Technology Working Pattern
Three main technologies are amalgamated to create a blockchain. They are-
- Private key cryptography,
- A distributed network along with a shared ledger and
- A charge to service the network’s transactions, record-keeping, and security.
Let’s suppose that two people want to make a transaction. Physical exchange of funds is considered the safest transaction of funds. But, security is the main challenge when it comes to online transactions. There is where you feel the need for cryptography keys.
Now, assume that two individuals have a private key and a public key. When these two are combined, it makes a secure digital identity reference for its proprietor. Just like an actual signature on the paper, the digital identity reference demonstrates the approval and authority provided by the involved parties. But, this can not make transactions. So, you have to complete the second step.
A peer-to-peer Network
Generally, normal individuals can’t see the online transaction of funds or verify the transaction between two parties. But, a third party can do it easily because banks or payment gateways act as agents to complete the transaction. Blockchain technology abolishes the involvement of third parties in the online transaction of funds. When you use this technology, a large pool of validators to complete the online transaction.
You must always keep in mind that network shares equal access to a public ledger. It records all transactions that take place in the blockchain. Let’s assume that a transaction is made between two people. Person A sends his/her public key to the person B. Then B will make a transaction using the private key and attach it to the public key of A. In the same way, transactions are joined that emerge from a block.
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