Early in 2009, a new “kid” referred to as blockchain technology was born, and it has grown steadily to become the go-to option for most financial services. The technology has opened the doors to a world of new opportunities. Blockchain technology is empowering people so that they no longer have to rely on third parties, such as banks, to define what and how services are offered.
There are so many benefits that come with using blockchain and cryptos today. The cost of sending funds is low, transactions are completed fast, and you can move funds any time of the day or night. Again, there are no background checks, and you are sure of keeping your profile as private as possible. You have every reason to join the new technology and start using crypto coins, but it is crucial to start by understanding them.
This post digs deeper to reveal the core mechanics of blockchain operations.
Blockchain is a Chain of Small Blocks
The term blockchain is derived from two words, “block” and “chain.” These blocks join together to create a sort of progressing chain loaded with information gathered along the way. Each block on the network contains information that is unique to details on the database.
The protocol arranges the information so that each block can identify the one before it, creating a sort of a growing chain.
The nodes or users on the blockchain network can see all blocks on the blockchain, but the information therein is immutable. The distributed and immutable nature of blockchain technology ensures that nodes in the network can access the details (balances) about your coins and confirm transactions. In return, they are offered a reward. This is how the blockchain networks are helping to reduce the need for centralized organizations like banks. The process of sending funds through a blockchain network only takes a few seconds instead of days or weeks when using a bank.
Blockchain Is All About Mathematics
Blockchain works wonders. In the past, one would not imagine being able to send money across the world in seconds or even borrowing money in minutes.
These actions are now possible because of blockchain technology, but what is the driving force? The answer is one word: mathematics.
The cryptographic technology that stamps every new block on a blockchain with a “hash” uses an advanced mathematical formula to ensure that the data cannot be changed. The calculation of every hash is based on the previous block’s content so that each block is unique and identifies the previous one for validity.
For blockchains that use proof of work (POW) protocol, they generate complex puzzles that nodes must solve to get an opportunity to mine new blocks for a reward. Even the blockchains that use proof of stake (POW) also use mathematics, but not for generating complex mathematical formulas to confirm transactions. For example, voting, selecting delegates, and calculating rewards for stakers in POS networks use advanced math formulas.
Cryptocurrencies are Just Getting Started
Cryptocurrencies and blockchain technology debuted in 2009, which is slightly more than ten years, but we can say that they are only getting started. In the first ten years, most governments, companies and individuals were unsure about cryptos. Therefore, they opted to take a line of caution, with some of them like China banning related activities. Now that they appreciate that blockchain and cryptos are indeed good, the adoption is amazing.
Central banks are developing their own blockchains while banks are migrating some of their operations to blockchains.
There has been an explosion of decentralized finance (DeFi) platforms as people discover that they can indeed do a lot more with crypto coins other than leaving them to lie on their wallets. For example, you can stake the coins for passive income or use them for crypto lending. Others opt for yield farming and crypto trading. So, you should not be left behind because there is a lot that you can do with cryptos.
To learn and identify more beneficial areas of blockchain and crypto coin applications, make sure also to have experts on your side. Visit hi.com for all that you need about blockchain technology and its applications.