Blockchain is a system that records and enables transactions that take place between cryptocurrency users, digital currencies.
This tool recognizes and authorizes each digital currency exchange, recording the transactions as in an accounting book. It displays information that proves validation to the public.
The operation of recognition and validation through the Blockchain takes place in a decentralized manner, different from the validation made in bank transactions.
How does Blockchain work?
Blockchain works using a kind of “block” for storing digital information from financial transactions involving Cryptocurrencies.
In these blocks, the stored information has data such as the values and the subjects involved in the transaction, in addition to the block identification hash.
For each block, the hash is generated mathematically according to the characteristics of the block and used in a unique way, that is, each block has its own hash.
Afterwards, there is a validation of this information that can prevent, for example, that the same Bitcoin is used in two different operations. This validation is done by different members of the Blockchain network known as “miners”.
As its name suggests, the tool forms “chain blocks”. This is because from the validation of the previous block, a new block appears to receive new information. The new block is added containing its own information, plus the hash of the previous block.
In addition, the creation of new blocks validates the existence of the older ones. Thus, the older, the more validations that block received. Finally, all transactions are recorded in a type of ledger known as a ledger.
The ledger is visible to the entire public.
Difference between Blockchain and Banking
In Blockchain, the validation of Bitcoin transactions, or other cryptocurrencies, takes place through the miners. That is, the more miners, the greater the security of the network.
In addition to assisting in the formation of blocks, miners must calculate complex mathematical formulas for each hash to be validated. The miner who decodes first receives a bonus, while others must analyze whether the calculation is correct.
This structure, however, is different from the validation that takes place through the banking system. There, several users carry out their operations and the bank itself is necessary to register and prove that they are valid.
In the banking field, the system is known as the Centralized System, while Blockchain is considered a Decentralized System.
How did Blockchain come about?
Blockchain emerged as a Bitcoin system, mainly after the publication of the Bitcoin article: A Peer-to-Peer Electronic Cash System. The author was famous for his pseudonym Satoshi Nakamoto, but never personally known.
Thus, Blockchain came to be known as the system that would conduct the transactions of all Bitcoins and later other cryptocurrencies. The system has come to be widely used by security for those who choose this type of currency in the digital environment.