The Blockchain – The hidden hero behind cryptocurrencies

The Blockchain – The hidden hero behind cryptocurrencies

Blockchain has been a part of the cryptocurrency world since its very beginning. Despite the skeptical opinions at thestart of the Bitcoin-era, the cryptocurrency holds the focus onto itself for almost a decade now. At first, most people didn’t dig deeper into the nature of cryptocurrencies (which is ironic, because you have to “mine” the virtual tokens). This is understandable because the massive gains from a new asset class are likely to overshadow the driving force behind the scenes.

Things are different now, as more and more users turn to Bitcoin, Ethereum, and other cryptocurrencies to seek profit. Many of them embraced the blockchain technology, and they are the reason for the massive hype about it nowadays. It may not sound possible for people outside the financial area, but blockchain has the potential to change the economic state of the world.

According to FXGM South Africa experts, blockchain has the needed potential to threaten the stability of central banking. It is a double-sided knife, as they may also use it with the right attitude, but all in all –blockchain may be labeled as one of the most important inventions in the digital era.

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What exactly is a blockchain?

Blockchain was created with the purpose of a decentralized ledger for Bitcoin transactions. It forms an entire Bitcoin network, which does not fall under regulations from the outside world. The decentralized database means that the storage devices have zero links to a common processor.

The blockchain is the home of the growing list of crypto-transactions by the usage of blocks. Every block is time-stamped, and then it is linked to the previous block. This leads to the name of the phenomenon – blockchain.

An individual user is only able to edit designated sections of the block. The sections that belong to them are open for editing, while all the rest are forbidden from access. When you contribute to the growth of the blockchain, you receive private keys. They operate like a password for the section of the block. The breakthrough of blockchain is the unmatched level of synchronization. Even though it doesn’t have a common processor, every copy is synchronized with the others.

Peer-to-peer networking, consensus protocols, and blockchains

  • Peer-to-peer networking – computers in a peer-to-peer network are linked. As blockchains are decentralized, this removes the element of control. No government or bank can access it, and change it to their liking. Each machine in the blockchain has all of the data – updated and shared. In one word – synchronized.
  • Consensus protocols – the peer-to-peer network works like this – every participant in the blockchain has to agree on the addition of new blocks to it. This is where consensus protocols come into play. These protocols/rules are written in the software of the blockchain computers. The software is responsible for the synchronization and the agreed state of every computer in the network.
  • Blockchains – the very agreement on all of the shared data is called “the blockchain”. It makes verification of the growing data easier within the network. New data entries are linked with old data entries by a form of reference.

The Blockchain boom – is it here to stay?

As FXGM South Africa experts underline – it is still early to say that blockchain will become a part of our everyday lives. The inflated expectations have proposed the end of central banks as we know them today, but the end of the centralized financial system is too far away. The current banking system is still a constant part of our social life.

To remove the centralized control of banks and leave it in the hands of the general public would be a drastic step. But this doesn’t mean that many of the good blockchain qualities can’t be adopted for a better economic realm.

Share your opinion on the blockchain technology with us! Write a comment and let us know what you think!

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