Blockchain technology is the foundation of cryptocurrency, but it can also be used for many other purposes. In this video, you’ll learn how blockchain technology works behind the scenes.
Blockchain technology is often described as a distributed ledger. This is a ledger that’s available for anyone to be able to see. And its job is to keep track of individual transactions. One interesting characteristic of the blockchain is that everyone who’s participating on the blockchain can maintain the ledger, and everyone has a copy of this ledger. Once changes are recorded in the ledger, those changes are distributed to everyone who also would like to maintain a copy of this ledger.
This means we can use the blockchain for anything that would require us to keep track of transactions. This might be payment processing, digital identification, monitoring of the supply chain, or digital voting. First, we need some type of transaction. We might be transferring Bitcoin from one person to another. We might be creating a data backup, and we want to track the process of that backup transfer. Or maybe we’re transferring a house title from one individual to another.
Instead of sending the results of that transaction to one person, we send the transaction information to everyone who’s participating as part of this blockchain. So every individual device in the blockchain that is keeping track of the ledger will also get a copy of this transaction. This transaction is then added into a larger block of transactions that will ultimately be processed into the blockchain.
To complete the block, we add a hash to the block, and that provides integrity of all of the transactions that are part of this particular block. A copy of this block is now sent to everyone who has a copy of this particular blockchain’s ledger. This hash is very useful because if somebody goes into the blockchain and modifies one of these existing transactions the hash is no longer going to be valid. And as other devices that are also maintaining the ledger see that a block has come through with an invalid hash, it throws out the block and confirms that this block has been modified.
As you’ve probably seen with cryptocurrency and other applications that use the blockchain, this type of technology is one that we’re able to use for many different purposes. And we’ll certainly be seeing additional functionality from the blockchain in the future.