Blockchain; The working Principle Behind Crypto

Blockchain technology is a decentralised, distributed ledger system that securely records a transaction across a network of computers. Each transaction is verified and added to a block, which is then linked to a previous block in a chronological order, forming a chain. This chain ensures the integrity of data stored in it.

Here is a simplified overview of how it works in crypto markets:

Decentralised Ledger – blockchain serves as a decentralized ledger, recording all transactions across a network of computers. Each transaction is stored in block, which is connected to the previous block, forming a chain of blocks, hence it is named “Blockchain”.

Peer to peer networks – the blockchain networks consist of nodes (computers) that validate and record transactions. Each node maintains a record of the entire blockchain. Ensuring transparency. 

Cryptographic security – transactions are secured using cryptographic technology. Each transaction is verified by multiple nodes before being added to the network.

Consensus mechanism – Blockchain technology uses a consensus mechanism to agree on the validity of transactions and the order in which they are to the blockchain. Popular mechanism includes Proof of Work (PoW), Proof of Stake (PoS) etc.

Smear contacts – Many of the blockchain platforms supports smart contacts which are self-executing contacts in terms of the agreement directly written in to the code. Smart contact automates and enforce the execution of transactions.

In crypto markets, block chain technology facilitates the buying, selling and transferring crypto currencies securely without the intermediaries of the bank.

Vineeth. U. V, Asst. Professor, Commerce, Al Shifa College of Arts and Science, Perinthalmanna