A simple guide to Blockchain
If you didn’t know already, blockchain is the technology on which digital currency is based. Many people have heard of Bitcoin, but there are a number of other important digital currencies that are also making waves across the financial sector too, including Litecoin and Ethereum. Blockchain technology allows these currencies to be distributed but not copied, with the result that each individual piece of data can only have one owner, thus allowing crypto coins to be only owned by one person.
Why is it called blockchain?
The origin of the name stems from the process on which blockchain technology operates. A ‘block’ is a record of new transactions. When this block has been completed, and thus the transaction has been completed, this block is then added to a chain of information. Owners of cryptocurrency have their own password to an account, which is located at some point along this chain, and this is where ownership is recorded. Essentially, digital currency can be transferred between accounts on this chain, and this can be done within the need for a middle agency, such as a bank.
So how does blockchain work?
Imagine if Tom wants to send some digital currency to Jim. Tom will access his online account and send the amount required to Jim’s account. By doing this, the money will leave Tom’s wallet, and the transaction information will be represented online as a block. This block will then be distributed to the network, where it will be checked for validity. Assuming that the transaction is legitimate, the block of information will be added to the existing chain of information, thus creating a permeant record of the transaction. When Jim next logs into his account, the information available on the network will register that the money has moved from Tom to Jim, so Jim now has that money in his wallet.
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