What Is Blockchain Technology? — NFT – Crypto – Games

Beyond being transparent with data, the blockchain is also a secure way to store it. Using Bitcoin as an example, here’s how a transaction is added to a new block:

When a bitcoin user sends a transaction, a message is created with both the sender’s and the receiver’s public addresses and the amount being transacted. The sender takes this data, adds their private key to the mix and then creates a hash of it (turns it into a fixed-length code.) This creates a digital signature to confirm the person who owns the amount of bitcoin intends to send it to the receiver.

The sender then packages this digital signature with the message and their own public key and broadcasts it to the network. It’s kind of like saying, “Hey, everyone! I want to send this person bitcoin.”

(Note: For most wallets and other applications, all this happens “under the hood” and users don’t have to actually deal with the processes themselves.)

The packaged transaction joins a waiting room filled with other unconfirmed transactions looking to be added to the blockchain, known as a “mempool.”

In the case of the Bitcoin network, miners who have successfully discovered new blocks through proof-of-work then take a batch of transactions from the mempool (usually based on which ones have the highest fees attached), verify each transaction to make sure each sender actually has the amount of bitcoin in their wallets they want to send, run it through software to make sure the packaged data (digital signatures, messages and public keys) are legitimate, add it to the new block and finally broadcast the proposed new block to the network so that other miners can double-check everything is correct.

This is similar to the process used in proof-of-stake blockchains, except instead of mining nodes discovering and verifying transactions, users who have locked away an amount of cryptocurrency – known as “stakers” or “validators” – carry out the process.

Nodes can perform a variety of tasks. These include keeping a historical record of all transaction data, verifying transactions, and, in the case of mining nodes or validator nodes, adding new blocks to the blockchain. Once a transaction has been approved and added, the information cannot be altered or rewritten. That is why data stored on a blockchain network is described as “immutable.”

The blockchain simply records every transaction that has ever taken place on its network. For example, the Ethereum blockchain is a record of all ether transactions that have ever taken place. So if there are updates that need to be made around a previous transaction, rather than going back to the initial data, a new record is made about the change.

What Is Blockchain Technology? — NFT – Crypto – Games


Categories: Economic History

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