With every passing day, people’s interest in cryptocurrency is continuously extending. It is extremely surprising to witness such a huge engagement of investors in such a short course of time. Well, when the entire discussion is based on popular cryptocurrencies, it’s not possible not to mention the blockchains. Right, isn’t it? Now, the major concern is why there is a need to address the blockchains when we are mentioning cryptocurrencies. Let’s find out what connects the two subjects along with what is a blockchain that we will discuss further in this article.
Before connecting the dots, let’s get some information on the blockchains first especially for those who are fully unaware of it. It is a very necessary part of the investing business as it is the technology behind cryptocurrency. Though it is slightly different in terms of storing data as unlike other technologies data gets stored in the forms of blocks here. So, in short, blockchains are nothing but a kind of database. All the blocks that contain the data are arranged in chronological order making one source of data. It consists of all the information.
Blockchains Usage In Cryptocurrency:
Now, these said blocks contain numerous transactions. By using these, one can easily distribute the data without copying the information. However, it’s not the first time when this kind of digital currency got introduced. In earlier times, people also came up with ideas. Despite having creative and unique ideas, they lacked the platform which could promise the investors security. So later the blockchains came in light and from that time, it is being used by the creators and the investors all around.
Now, the questions remain the same that why it is connected with cryptocurrency. Well, it plays a vital role in cryptocurrency as it gives investors a safe and secure platform for all of their transactions. You must be wondering how blockchains are used in cryptocurrency. Let us break down to you how it can exactly be used. As it is obvious that for every transaction, one has to start the process with authentication.
Process of Transaction Explained:
Now, this process has two different parties. One being the sender while another one is the receiver. So for a transaction to happen smoothly, cryptographic keys are used. Now, what again are these keys and why are they used? Well, are also a sort of data arranged in strings. It works the same as any other password which separates the users’ identities from one another. These keys are also categorized into two parts where one is private, the other is public.
Just as the name suggests, Private keys are only for the users and only they have the power to see it while the public is visible for everyone. The users can create blocks for the said transactions by bringing the keys in use. After that, the users then authorize the transaction. The computers that are available in the network also called nodes must approve that the transaction is valid.
Another step is proof of work where the owner of the respective computer share their approval and get an incentive in return. Now, if they want to add another block to the chain, they are required to solve a particular problem of mathematics. By doing this, they get rewards while the transaction happens as well. So, by using blockchains, transactions on cryptocurrencies take place easily.