What Is the Bitcoin Blockchain?
In the world of digital currencies, one often overlooked but truly important aspect is the technology behind blockchains. A “blockchain” is simply a ledger maintained by the network of peers, which is accessible to everyone, or rather, only to those that are willing to spend some coins. This type of ledger has no central administrator; rather, all transactions are held by each member of the network. While it can sound complicated, in reality it’s quite simple. Here’s how you can use this technology for your business.
The most widely used type of decentralized ledger technology is called the distributed ledger technology. Distributed ledgers are used to track the changes that happen within the ledger itself. Blockchains can be thought of as being like ledgers that are shared across the Internet, but only one computer system is maintaining the data. On the other hand, in the case of the dlt protocol, this ledger is maintained on a public ledger so that every single member can view it at any time.
The distributed ledger technology in the hands of developers will create a new breed of currency applications that make up the backbone of the new global monetary network. With it, every transaction in the network will be recorded in a block that is sent to every single participant. Every single peer-to-peer transaction will be stored as part of this chain. Once every transaction is entered into the ledger, it will be cryptographically checked before being approved and this prevents fraud. This ensures that each transaction is legitimate and there is complete security and fairness when dealing with currencies.
In order to understand how the dlt ledger works, it helps to understand how smart contracts work. Smart contracts are digital contracts that are operated between two independent parties. In the case of the dlt protocol, these smart contracts are being used between members who have opted to establish a decentralized autonomous network. Through this process, every transaction that occurs is automatically cryptographically secured through the use of a distributed ledger such as the Blockchain.
A distributed ledger such as the Blockchain is useful because it provides a transparent and secured global transaction system. By establishing a decentralized network of cooperating users, every single transaction that takes place is guaranteed to be legitimate and secure. Unlike the traditional system of transferring money from one party to another, which is susceptible to fraud and corruption, the transactions in the Blockchain are entirely fruitless. There is no need to rely on a third party to approve a payment or to monitor the ownership of assets because the properties that are being transferred are kept in the custody of the individuals who are using the Blockchain.
Since there are several competing currencies being used across the globe today, the possibility of operating a worldwide currency is virtually nil. As a result, the only real way for people to securely conduct monetary transfers is by using the bitcoin Blockchain. Although some governments and banking institutions are beginning to adopt the use of decentralized ledgers such as the Blockchain, most individuals will continue to transact through the traditional means available to them. However, given the track record of the bitcoin blockchain, it is likely that decentralized currencies will become more mainstream in the future.