How Does Blockchain Work?
So, then, how does the blockchain work? Let’s recall a few key features before we get into the details:
- Blockchain keeps a record of all data exchanges – this record is referred to as a “ledger” in the cryptocurrency world, and each data exchange is a “transaction“. Every verified transaction is added to the ledger as a ” block“.
- It utilizes a distributed system to verify each transaction – a peer-to-peer network of nodes.
- Once signed and verified, the new transaction is added to the blockchain and can not be altered.
Why is Decentralization So Important?
For enthusiasts of blockchain, you will hear a lot about the decentralized aspect of it. What makes this so appealing is that it makes the blockchain impervious to censorship, tampering, or corruption.
Because it uses a peer-to-peer network, copies of the ledger are stored in many different locations, and unless you manage to track down every single one of them (Bitcoin is estimated to have over 35,000 nodes in its P2P network), you can’t destroy it. As well, because so many different, independent nodes are keeping track of the ledger, modifying it in an untrustworthy way won’t go very far because all the other nodes will disagree with that transaction and won’t add it to the ledger.
This is a huge part of why so many people believe blockchain technology is the future of currency, and why it is being adopted in industries other than cryptocurrency.