How Does Blockchain Work? There’s More to It Than Just Bitcoin!

Everything you need to know about how blockchain works

Cryptocurrency has become an increasingly popular investment class. For now, investors are primarily in it for the appreciation in value or the memes rather than for utility purposes.
Cryptocurrencies are digital currencies made up of digital code, traded as assets. Blockchain is a decentralised ledger technology that creates and stores them.
Cryptocurrency is a divisive topic. Its supporters believe it to be a disruptive technology that will change the world for the better, whereas its critics have claimed many cryptocurrencies to be Ponzi schemes.

Nodes

As mentioned above, requested transactions are transmitted to a peer-to-peer network of nodes.

Who Owns a Node? Do I Own One and Not Know It?

You run, rather than own, a node. For example, running a Bitcoin node is like plugging your computer into the Bitcoin network, allowing you to partially or fully validate transactions.

You must have the available computing and bandwidth resources to run a node. The resources you need will vary depending on the type of node you wish to run. There are two types of nodes, full and lightweight:

Full node - the more resource-intensive approach. It involves the task of validating all transactions on the network.

Lightweight node - this type of node only validates the most important data when downloading and validating transactions.

Unfortunately, we don’t all have access to a node without knowing it. You will need to install the software to run a node. For example, the most common Bitcoin node software is called Bitcoin core.

Transactions

What Is a Transaction Request?

A transaction request could, for example, be 1 Bitcoin moving from one user's wallet to another. But it can be all sorts of things, not necessarily a cryptocurrency changing hands. Another example would be registering a house's ownership on the blockchain.

How Is It Verified? And by Whom?

Nodes verify transactions.

Hashing

What Is a Hash?

A hash, or a process called ‘hashing’, is the transformation and creation of input data (of varying length) into a string of fixed size. The algorithm used to perform the hash functions varies depending on the blockchain. The purpose of the hash function is to prevent fraudulent transactions or double-spending. Because the ‘string’ produced is made up of a unique number, it cannot be duplicated. Uses of the hash value include identifying and verifying blockchain transactions easily.

HOW BLOCKCHAIN WORKS. COMPLETED. ✅

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