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Everything you need to know about blockchain

In this article, we will explain everything about Blockchain. What is it? How does it work? How can you position yourself to capitalize on – What could be – a huge growth opportunity. Read on to find out!

Blockchain definition

It is a shared, digital ledger, or database, of financial transactions which are saved on many computers in diverse locations. The database always grows as new transactions or ‘blocks’ are added to it. This forms a continuous chain of data where the records are public and provable. There is no central location, so it is difficult to hack as the information exists in millions of different places.

What is blockchain technology and why is it a game-changer?

3 principal technologies merge to make a blockchain. These include private key cryptography, a distribution network with a shared ledger, and a stimulant to preserve the network’s transactions, record-keeping, and security. These merge to make blockchain technology a decentralized, transparent, and immutable system.

Decentralization

Most traditional forms of payments are centralized. In a decentralized system, such as the one created by using blockchain technology, everyone in the network owns the information and can access the history of transactions but cannot change it. This immutability is another key pillar of blockchain technology.

Immutability

Once something has been inserted into the blockchain it cannot be tampered with. There is no possible way to ‘fiddle with the books’. This is because the basic technology uses cryptographic hashes. In the context of payments, this means transactions are taken as an input and run in a hashing algorithm which gives it an output of fixed length and fixed size. This means that each hash could identify a huge set of calculations or string of data.

Transparency

Blockchain technology offers a high level of transparency and privacy at the same time. A user’s identity is hidden behind complex cryptography and can only be identified by their public address.

At the same time, you can still see all the transactions that have been done on their public address. This level of transparency does not exist within the present financial system which is why blockchain technology is changing the field of finance as we discuss later on in this article.

How does blockchain work?

For example, David wanted to send money to John. Using blockchain technology this transaction would be depicted online as a block. This block would be distributed through the blockchain network which is a private kind of peer-to-peer network where the workload is divided between members rather than one central server.

Once the network confirms that the transaction is good, the block is then added to the chain and reconciled through the network, creating a constant record. David’s record of possession of the money then moves to John. The technology helps to cut off the mediator but with full transparency and privacy.

Blockchain explained in the real world

One of the 1st real-world uses of this technology was in cryptocurrencies such as Bitcoin and Ethereum. This is because the technology permits digital information to be distributed and not copied, meaning each data piece can only have one owner which is important when dealing with payments; in effect, a digital ledger.

Bitcoin blockchain

Bitcoin was invented by Satoshi Nakamoto. The Bitcoin blockchain is localized, it is not controlled by one central authority. It is maintained by a network of miners “nodes”. These nodes are reason-built computers that solve complex mathematical problems in order for the transaction to go through.

For example, David makes a Bitcoin transaction. This transaction would come from David’s digital currency wallet which will have a private key. and This key is David’s digital signature which provides the mathematical evidence the transaction has come from that wallet.

This may sound like a very long and complicated way to make a transaction but remember that all these transactions are transparent and listed on the Bitcoin ledger. It also demands several parties to verify the transaction and if one part of the network went down the whole network would not collapse.

Ethereum blockchain

It is the world’s second-largest digital coin by value after Bitcoin. This blockchain platform has a digital coin called ‘Ether’ linked to it.

The Ethereum blockchain allows people to build decentralized apps on its platform, specializing in smart contracts. These are contracts that are automatically executed when specific conditions have been met by all intended parties. This level of automation helps to speed up the process.

Blockchain wallet

A blockchain wallet is a software program that allows users to buy, sell and monitor their balances for digital currency such as Bitcoin and Ethereum. The blockchain wallet does not store cryptocurrencies. They keep a record of all the transactions connected to the currency and store them on Blockchain.

There are various types of blockchain wallets available. Hardware wallets are devices such as USB pens that store private keys for a user. There are software wallets, such as desktop, online and mobile apps, that store private keys for any transactions made.

Blockchain stocks

To demonstrate just how many investors are interested in blockchain stocks, you just need to look at Riot Blockchain. This was a penny stock which in 2017 became $40 per share when they changed their name from Bioptix Inc to Riot Blockchain.

The company was a maker of diagnostic machinery for the biotech industry. After changing its name and rebranding itself to have a focus on purchasing cryptocurrency and blockchain businesses, the stock shot up on investor hype.

How to invest in blockchain stocks

Purchasing and selling shares in blockchain stocks such as IBM, Alibaba & Mastercard can be done in just 3 easy steps:

    Open a share trading account.

    Download your share trading platform.

    Open a trading ticket and take your 1st trade

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Markets Bloom is a trading academy consisting of former trading industry professionals. We aim to help all types of traders looking to trade in the financial markets.

By registering with us, you will gain amazing insights into common issues traders face as well as how to instantly improve your trading approach. Our team of experts will be with you every step of the way on your journey to becoming a better trader.

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