The idea of cryptocurrency has been around for decades but the introduction of bitcoin completely changed the landscape of cryptocurrency. You have to be living under a rock for the last 15 years if you don’t know about cryptocurrencies and their value. Usually cryptocurrencies aren’t backed by assets like traditional currency and this is one of the major reasons that their value is so high. Cryptocurrencies are decentralized so to regulate such currency and make it usable, supporting technology is required and the most important supporting technology for cryptocurrencies is blockchain.
So What Exactly Is Blockchain?
When it comes to the basic definition of blockchain, you must know that it a complex system that records your data in the most secure way possible. As you would keep a manual journal to keep a track of your transactions, block chain is digital way to ensure that all of your data is safe. It is highly impossible to change the data that goes into the blockchain, therefore, eliminating the possibility of potential hacks or cheats.
The technology works in a unique way, which we will cover soon. What you need to understand is that blockchain is used for not only one aspect. It is a medium through which multiple cryptocurrencies come into being. Bitcoin being the most popular example available.
How Does Blockchain Technology Work?
Before moving on to how cryptocurrency comes into play through blockchain, it is important to understand the workings of blockchain itself. It is a process which covers multiple steps. While there are more than a couple steps in the process, it is important to note that the transaction takes barely any time to complete.
How blockchain works is that a transaction is requested which initiates the process. The second step in this is the movement to a P2P network, which includes a range of computers (nodes) that validate the transaction for the users. Once verified, the transaction can cover cryptocurrency or any other data.
After the verification of data, there is a new block created where the data is stored. This is an addition to the already chain of blocks present. The data added cannot be changes now, and the transaction is complete.
How Does Cryptocurrency Come Into Play?
When it comes to cryptocurrency, you must know that blockchain is the technology that it uses to work. While cryptocurrency is the way that you make your transactions, the underlying technology that does the entire process is blockchain. As we have already mentioned, Bitcoin is a popular cryptocurrency that makes use of blockchain technology for transactions.
Cryptocurrency, in essence, is similar to how you would use paper money. You get to make digital transactions through this once the verification through blockchain is complete. Almost every cryptocurrency present in the industry has a blockchain technology base.
To get access to cryptocurrency, you will need to have fiat currency to be able to access cryptocurrency. Once you have the cryptocurrency, it will be backed by blockchain. This will ensure the safety and security of your data as the decentralized technology is a renowned for this.