Cryptocurrency can’t just exist on its own. As it’s an intangible digital asset, it needs somewhere to be stored, and we as crypto traders need a record of how, when, and to whom (or at least an address of to whom) it is traded. To facilitate the existence of cryptocurrency, we call upon the technology of the Blockchain.
Imagine you are sat in a restaurant. Patiently, but hungrily, you wait for your favorite meal to head your way from the kitchen and be placed on your table. While you’re licking your lips at the prospect, you’re probably not paying a great deal of attention to the work that goes into making that happen — the supply chains that are established to efficiently supply the restaurant, the ingredients that go into the dish and ensuring they stay fresh for each day of service, the chefs that turn up on time and create the meal. In a similar kind of way, the same goes for the Blockchain with cryptocurrency — we know it’s there, but we prefer a main course of Bitcoin.
We are all crypto enthusiasts, but that doesn’t always extend to a similar passion for the Blockchain. However, without it, there would be no cryptocurrency in its current state. It is, after all, the Blockchain and its decentralized, hyper-secure technology that makes crypto safe, trustworthy and an ever-growing trend.
The Blockchain is exactly what it says it is — it’s a (figurative) chain of blocks. Within each block is a collection of transaction information. In the context of cryptocurrency, it will log all of the instances in which crypto changes hands. It will store this information chronologically, will be cross checked against multiple ‘nodes’ to ensure its authenticity, and when the block is full it will connect to the latest block in the chain, be rubber stamped as legitimate and stored forever — never to be touched, hacked, tampered with or compromised.
Think of a traditional system of transaction information — a perfect example being with a bank, let’s say. When you complete a transaction with the bank, they keep a record of the transaction information, and it is theirs to own. In cryptocurrency, the Blockchain hosts the transaction history — and critically, in no particular place. The transaction information held in the Blockchain is distributed across multiple ‘nodes’, or a place where data is stored in a network (think of it as a laptop, if trying to visualize). Each node in the Block verifies the transaction information, and cross-references the transaction information against the other nodes in the block. When all Nodes have identical transaction information, it becomes verified and secured. When there’s a discrepancy in the transaction information from one node against the others, they all cross-reference against each other to verify which is correct. It is this process that makes the Blockchain ‘unhackable’ — it’s essentially impossible to fraud the network against ‘true’ transactions.
The technology of the Blockchain is groundbreaking, and is starting to become adopted in industries way further afield than cryptocurrency. Due to its fortified level of security, legal firms are turning to the Blockchain as a secure way to store contracts and confidential information. Rather than storing these files on a password protected folder on the company laptop, they can be filed in a decentralized space that is hyper-secured.
As the tide continues to turn towards Blockchain technology, and it continues to be adopted across multiple industries, expect to see its popularity continue to soar. In the context of crypto, look out for tokens that are secured by the very latest Blockchain technology, as they often have lightning quick transaction speeds that make them very appealing to traders.