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Interest in blockchain technology is growing along with the popularity of cryptocurrency. If you are seriously thinking about investing in digital assets and earning money on a crypt, you should understand how the blockchain works. And we will tell you what a blockchain in cryptocurrency is in simple words.
What is blockchain in cryptocurrency?
Translated from English, “Blockchain” means “chain of blocks”. It is a network where the links are separate records of actions. The chain is continuous, so the blockchain is considered immutable, therefore reliable. In simple words, each block is a digital code. All subsequent blocks contain information from the previous ones and new ones, the blockchain can be called not a simple database, but also a way to encrypt information.
This technology is used for cryptocurrency transactions. When one user sends a crypt on the blockchain, thousands of computers located in different countries of the world simultaneously confirm and store information about the transaction. The operation takes a couple of minutes, and sometimes less. Funds in the blockchain cannot be faked or lost, third parties do not participate in the transaction, and the accuracy of the calculation and transaction is ensured by the mathematical component of the technology.
Blockchain works on several principles:
Important! Each new chain link is written after the existing one, all previously recorded digital codes cannot be changed, deleted or swapped.
How transactions are carried out in the blockchain network
Consider the rules for executing a transaction on the example of Bitcoin. To send BTC, the user must have access to two keys – public and private. When you hear that someone owns Bitcoin, that person actually has access to two keys:
- open – a certain amount of cryptocurrency was previously sent to it;
- private or unique – used to authorize the transfer to someone of a cryptocurrency received on an open digital code.
The public key can be called a Bitcoin address, which is a randomly generated code of numbers and letters that works like an email or social media login. Public keys are public, they can be safely shared with other participants in the trading platform in order to receive a transfer in the form of a cryptocurrency.
The private key is another code of letters and numbers, it works like a password to an email or page on a social network. It cannot be disclosed. The one who knows the unique key owns all the virtual assets stored on the wallet.
A feature of blockchain in cryptocurrency is anonymity. The technology does not store personal information about the owner of the private key, so the operations are anonymous, and it is almost impossible to identify the sender or recipient of the cryptocurrency.
Blockchain has successfully penetrated the economy, more precisely, its digital sector. Although this technology is still threatened by technological failures and crises, it is actively developing, becoming safer and more reliable for users. According to the forecast announced at the World Economic Forum in Davos, by 2027, about 10% of the world’s GDP can be stored using blockchain. Gradually, the technology will be introduced into almost all economic areas, including the payment of pensions or social benefits.
Thanks to the growing popularity of NFTs, which are also created using the blockchain, major global brands are entering the industry, and the number of GameFi users is growing. At the same time, the decentralized finance market is developing, which in the future will compete with classical financial markets. For ordinary people, this means one thing – it’s time to delve into the topic and study the field of digital assets, understand the principles of the blockchain and invest in cryptocurrency and NFT.
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