When we hear the word ‘crypto’, the first thing that pops up in our minds is Bitcoin, probably even Ethereum if you are familiar with the space enough. Bitcoin is not only an example of cryptocurrency in general but is also the first blockchain to ever exist.
However, Bitcoin as a blockchain and as a cryptocurrency are different entities. As a blockchain, it’s the technology that houses the currency. As crypto, it’s the currency itself.
Cryptocurrency is a digital currency that is decentralized in nature. Right now, it has been adopted to make transactions. Be it an investment, or a payment you have to make to an international vendor, Bitcoin has a lot to offer.
Digital assets use blockchain technology to function and record their online transitions and be secured altogether. Being used in multiple ways, blockchain has a significant impact on digital assets.
Technology to record cryptocurrency
Blockchain technology is used for cryptocurrency and storing cryptocurrency data. Blockchain is also known as distributed ledger technology. Using this technology makes the history of the asset unchangeable, helping make transparent transactions. These transactions are made through a decentralized network and cryptographic hashing which converts any form of data into a string of text.
Blockchain technology operates as a decentralized distribution chain which means that the access is shared with everyone for the base document making it transparent and unaltered. It’s like sharing (not copying or transferring) a Google document with a group of people. In this case, no one is waiting for another party to make modifications without them being aware of it. All the changes are transparent to all the users and recorded in real time.
The original content on blockchain technology isn’t modified once it’s created. This adds an extra layer of security. Therefore blockchain technology is one of the safest technologies in the world and is being used as a security system through different applications.
Parts of Blockchain
Blockchain consists of three important parts:
- Blocks
- Nodes
- Miners
A block consists of data, nonce, and hash wherein data is present in the blocks, nonce is a randomly generated number which is followed by the generation of the hash. Hash is also a number permanently attached to the randomly allocated number i.e nonce. Hash is often starting with lots of zeros which makes the value very small.
Mining is a process where new blocks are created. This process is conducted by miners. Mining a block isn’t an easy task as the blocks have unique nonces and hash values, but the previous block’s hash values are also linked.
There is a very high technology that is used in mining for blockchain. Miners go through complex calculations to find out a nonce that will produce a hash accepted by it. Due to this complexity of work, A miner is well paid once the block is successfully mined and all the nodes on the network are accepted.
Storing cryptocurrency data
One of the questions that come to everyone’s mind is how is cryptocurrency data stored or how is blockchain data stored?
The answer is simple.
Since blockchain is decentralized, there is no place where it is stored. Rather there are different systems (also known as nodes) all across networks where the data for blockchain is stored. Each node or system has one copy of the blockchain for the transaction done on the network.
For better understanding, consider it like a spreadsheet. In this spreadsheet, the values in each cell are the values of an address. This spreadsheet also gets updated as and when the change happens for everyone who has the spreadsheet making it transparent as well.
Knowing Bitcoin was the first application that used blockchain technology. There were a lot of drawbacks that were left in it but were covered in the next applications. That’s why both bitcoin and Ethereum have different data storage. There are different solutions to storage for different applications using blockchain technology.
Cryptocurrency public ledger
A public ledger is a record-keeping system used to record information by the organization to keep a track of things like prices, commodities, etc. Cryptocurrency also has a public ledger for keeping a record system and public verification mechanism. This public ledger is famously being used in the world of cryptocurrency.
The ledger is used to maintain the people’s identity and their respective account details such as balance and transactions between the users. However, scaling and security issues are some of the challenges faced by these public ledgers.
A public ledger can be referred to as a data management system to keep bank records of the account holders. All the process on a public ledger starts as soon as a cryptocurrency starts. This helps a user to have a copy of the ledger and also keep a track of the actual network. These details include factors like the number of tokens held, who has the crypto tokens, authenticity of the transactions, etc.
Public ledgers have their advantages but there are some disadvantages as well. Some of them are that keeping a maintained public ledger can give access to hackers, security agencies, and government access to every participant’s public account. Similarly, keeping transactions of such a long history makes it difficult for scaling to keep up with the growing transactions.
These public ledgers are a main part of the cryptocurrency as they are responsible for storing cryptocurrency data after verification. Maintaining cryptocurrency ledgers is important to maintain for easy transactions in cryptocurrencies.
