There’s nothing quite like blockchain technology to leave people feeling a little confused. Serving as the entire foundation on which the crypto world is built, it’s a profound technology that is only set to grow in scope. So here we’re going to provide a basic outline as to what blockchains are and why they’re so useful.
A blockchain at its most basic is a decentralized ledger. With the ledger distributed across any number of parties and their computers, it’s incredibly reliable as there’s no single point where it can fail. It is secure too, as in order to tamper with it, a fraudster would not only have to alter numerous copies of the ledger, but they’d need to do it before the next ‘block’ on the chain is added (which happens every few minutes or so).
The Building Blocks of Security
As mentioned, blocks of data are continually added to the chain with the veracity of the data in each block (usually a collection of validated transactions) dependent on the previous block, which in turn is dependent on the block before that, and so on.
How that works in practice is that when you make a crypto purchase, that transaction is collected with a group of others that have recently taken place and turned into a block of data. It’s then that ‘Crypto miners’ enter the scene.
Crypto miners are individuals or organizations who compete with each other to gain the opportunity to add that new block to the chain. By being the first to solve a particularly complex mathematical problem, the successful miner gets to add the new block and receives a crypto payment as reward (often quite substantial). The rest of the miners then verify that the block is correct and it’s added to the chain which everyone then receives an updated copy of.
Now, that may sound complicated, however, it’s a remarkably secure way of updating data — hard to change but easy to verify.
Blockchain Keys & Wallets
Central to blockchain security is the use of public and private keys. With keys being the code needed to decrypt transaction data (and stop people stealing your money), they are, needless to say, essential.
When it comes to blockchain transactions, there are two types of keys used — a public and a private key. Each is a complex string of cryptographically created characters, and almost impossible to copy. With your public key being the address that people use to conduct transactions with you, your private key (which is only known to you) is needed to verify and authenticate these transactions — so without a private key, transactions can’t proceed.
With both keys are stored in your crypto wallet — a digital incarnation of a traditional wallet in that it holds all the financial tools you need to make transactions — the process is not only safe, but remarkably convenient.
Needless to say, there’s much more to blockchain technology that has been covered here. If you’d like to know more about the tech, and how it’s being used to make online payments more secure, visit Escrypto.