What is a blockchain? How does it work?

A blockchain is known as a distributed ledger that consists of transactions that are carried out across the computer network of blockchain. Every block contains several transactions and when there is a new transaction that takes place on the blockchain, a record about the transaction is added to the participant’s ledger. The decentralized database that is managed by several participants is known as DLT (distributed ledger technology). Blockchain systems record information and it is difficult to change, impossible to hack or attack the system. Blockchain uses distributed Ledger technology where the transactions are recorded using cryptographic signatures known as a hash.

Here are the important features of Blockchain -

• Blockchain is considered as a database that has encrypted blocks of data that are stored in chains in the form of the chronological order of data.
• Cryptocurrencies are distributed rather than transferred, by creating an immutable ledger of the asset. This set is decentralized that allows full-time access and it is transparent in its public operations.
• This transparent ledger preserves the integrity of the document that creates trust about the asset. Blockchain security measures and its public ledger makes it the best technology to be adopted in every sector.
• Even though Bitcoin is public through the use of blockchain technology, it cannot tamper. Bitcoin does not have any physical presence, so the user cannot protect Bitcoins by preserving them in a safe or anywhere else.

Here is how blockchain works using distributed ledger technology.

• The buying and selling of Bitcoin are entered and transmitted through a network of powerful computers called nodes.
• The network of nodes that are connected around the world confirms the transactions through computer algorithms, known as Bitcoin mining; the miners who complete adding a new block are rewarded with Bitcoins for their work.
• For completing the work the miners are rewarded or paid by network fees that are passed from buyer to seller. These can vary based on the volume of transactions carried out every time.
• When the sale is cryptographically confirmed, it is added to blocks available in the distributed ledger. The whole network should confirm the sale using the process called proof-of-work.
• This block is permanently added to the previous blocks where the Bitcoin transactions are carried out using cryptographic hash and then the sale is completed.

Bitcoin has become more popular and it is one of the topmost cryptocurrencies by market cap. It can be purchased from a crypto exchange or a bitcoin exchange like WazirX. Cryptocurrency exchanges have become popular and in recent years they have developed quickly, even though they have to undergo legal, security, and regulatory challenges. Governments have not accepted cryptocurrency as an asset class, they have added many regulations for buying, selling, or trade with bitcoins. This idea is finally shifting and in the future, we can say that cryptocurrencies can be widely adopted and accepted.

Blockchain is a technology that is used by several cryptocurrencies like Bitcoin and it is not the only version of the ledger system available in the market. Numerous cryptocurrencies have their blockchain with their preferred distributed ledger architectures. Further, the decentralization technology has made developers adopt them in the network with their set of rules and others to follow another set of rules as per their convenience.