Cryptocurrency has been in the headlines numerous times for numerous reasons. Someday we get to know about its phenomenal bull run, where the value of single crypto reached as high as 60,000 USD, while another day we get to know that corporate giant Tesla has invested billions in cryptos. What is the reason behind all the buzz around cryptocurrencies? What are its applications and how can change the world we live in? Let’s find out.
Cryptocurrencies like Bitcoin, Ehtereum, Litecoin are digital currencies that use a new blockchain-based ledger technology. This blockchain is the technological innovation that provides crypto its edge. It is the potential applications of this novel ledger that makes it a potential alternative to fiat currency.
Cryptocurrency has contributed substantially to the perfecting of transactional networks across the world. Transactions via blockchain networks are faster and more secure than regular transactions through existing institutions like a bank. To understand what makes cryptocurrency a superior mode of transactions, we need to understand how blockchain works.
What is blockchain?
The blockchain was developed in the year 1991 by two scientists Stuart Haber and W. Scott Stornetta. This technology was designed to implement a time stamp on digital assets. The purpose of the time stamp is to accurately record and maintain its circulation. Due to the time stamp, it becomes impossible to tamper with the record.
Satoshi Nakamoto used blockchain technology in its first-ever real-life application in Bitcoin. Bitcoin is the first cryptocurrency. Along with the blockchain, Bitcoin also uses Merkle trees and proof of work to store transaction data.
How does the blockchain work in Bitcoin?
Crypto usage and trading have become fairly common over the years. With the proliferation of trading applications like Bitcoin Exchange, it has become easier for small traders to trade and exchange in cryptos. Every crypto transaction is recorded in the blockchain ledger. The function of the blockchain can be explained in a few simple steps:
1) When a user with a crypto wallet and a private key makes a crypto transaction, it has to be recorded and updated in the blockchain ledger,
2) The nodes in a blockchain network maintain and update the ledger.
3) Every node has access to the blockchain ledger simultaneously because of its decentralized nature.
4) The miner audits a transaction by solving complex mathematical equations on the computer to generate the approximate hash.
5) The hash is used to verify the transaction.
6) Once the transaction is verified, it is stored as a block. These blocks are connected to each other in a linear order.
Blockchain applications beyond payment gateway.
The cryptocurrency has successfully implemented blockchain technology to maintain an accurate ledger of transactions. By combining it with Merkle trees, a proof-of-work system in a highly encrypted system, it has developed a process that can be used to track and record the circulation of a crypto token.
A crypto token is a digital asset. This means the blockchain application is not limited to payment gateways. Its application can be extended to the management and maintenance of other digital assets. These are some of the applications:
1) It can be used to aid copyright infringement of software. Today products like music, video, games, computer, and mobile applications are all softcopies. Piracy is a major problem in the circulation of these digital assets. Blockchain can be used to prevent illicit copying and distribution of digital assets.
2) The blockchain can be used to aid supply within the medical infrastructure. It can be used to record the supply and maintenance of drugs and equipment within an area.
3) It can be used to prevent money laundering. As the blockchain stores the data of the wallet along with the transaction record in the blocks, it can be used to trace suspicious transactions.
4) Blockchain can also be used to prevent identity theft. Blockchain technology can be developed to maintain data on registered citizens, their financial, medical details safely.
Conclusion: Blockchain is an important innovation in the digital age. With the cryptocurrency’s example, it can be implemented in other sectors that can be used to make society a better place.
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