crypocurrencyIf you are interested in technology or have traded cryptocurrencies, you have likely heard the term blockchain. This is the core technology used to generate bitcoin and additional cryptocurrencies such as Ethereum and Litecoin. The blockchain technology allows cryptocurrencies to create smart contracts and payment systems and the verification process prevents fraud.

What Does Blockchain Mean?

The blocks in a blockchain are digital pieces of information. The information refers to a transaction and describes the date and time along with currency (dollar) amount for the most recent transaction. The block also stores information about the participants in the transaction. Generally, this is an address from where the currency is coming from and going to. The address is a unique digital signature. A block will also store information that is unique and distinguishes it from other blocks. This is called a hash and allows you to tell it apart from other blocks.

How Does a Blockchain Work?

When a transaction occurs, a block stores new data and is added to the database (chain). The term blockchain suggests that the database consists of multiple blocks strung together. For this to occur, a transaction must occur. Once a transaction occurs it must be verified. After buying or selling goods or services or exchanging a cryptocurrency, the transaction is verified by miners.

When using blockchain, the verification process is left to a network of computers. These networks often consist of millions of computers spread across the globe. When a transaction occurs, the network of computers rushes to check that your transaction happened in the way you said it did. That is, they confirm the details of the purchase, including the transaction’s time, dollar amount, and participants. This also occurs when trading cryptocurrency on a blockchain. It does not occur on a CFD cryptocurrency trading platform.

Once the transaction occurs, it is then stored in a block. The transaction is given a hash. The block is also given the hash of the most recent block added to the blockchain. Once hashed, the block can be added to the blockchain. When that new block is added to the blockchain, it becomes publicly available for anyone to view. If you take a look at Bitcoin’s blockchain, you will see that you have access to transaction data, along with information about when, where and by whom the block was added to the blockchain.

Is Blockchain Software Secure?

Blockchain technology deals with safety and security in several ways. First, new blocks are always stored linearly and chronologically. This means a new block will always be the end of a chain. After a block has been added to the end of the blockchain, it is very difficult to go back and alter the contents of the block. That’s because each block contains its own hash, along with the hash of the block before it. Hash codes are created by a math function that turns digital information into a string of numbers and letters. If that information is edited in any way, the hash code changes as well. So, if a hacker tries to edit your transaction, the hash on your block will change, but the hash on the block behind it that has the original hash won’t. The next block in the chain will still contain the old hash, and the hacker would need to update that block in order to cover their tracks. In order to change a single block, a hacker would need to change every single block after it on the blockchain.