Why is blockchain important?
Traditional database technologies present several challenges for recording financial transactions. For instance, consider the sale of a property. Once the money is exchanged, ownership of the property is transferred to the buyer. Individually, both the buyer and the seller can record the monetary transactions, but neither source can be trusted. The seller can easily claim they have not received the money even though they have, and the buyer can equally argue that they have paid the money even if they haven’t.
To avoid potential legal issues, a trusted third party has to supervise and validate transactions. The presence of this central authority not only complicates the transaction but also creates a single point of vulnerability. If the central database was compromised, both parties could suffer.
Blockchain mitigates such issues by creating a decentralized, tamper-proof system to record transactions. In the property transaction scenario, blockchain creates one ledger each for the buyer and the seller. All transactions must be approved by both parties and are automatically updated in both of their ledgers in real time. Any corruption in historical transactions will corrupt the entire ledger. These properties of blockchain technology have led to its use in various sectors, including the creation of digital currency like Bitcoin
How does blockchain work?
While underlying blockchain mechanisms are complex, we give a brief overview in the following steps. Blockchain software can automate most of these steps:
Step 1 — Record the transaction:
A blockchain transaction shows the movement of physical or digital assets from one party to another in the blockchain network. It is recorded as a data block and can include details like these:
Who was involved in the transaction?
What happened during the transaction?
When did the transaction occur?
Where did the transaction occur?
Why did the transaction occur?
How much of the asset was exchanged?
How many pre-conditions were met during the transaction?
Step 2 — Gain consensus:
Most participants on the distributed blockchain network must agree that the recorded transaction is valid. Depending on the type of network, rules of agreement can vary but are typically established at the start of the network.
Step 3 — Link the blocks:
Once the participants have reached a consensus, transactions on the blockchain are written into blocks equivalent to the pages of a ledger book. Along with the transactions, a cryptographic hash is also appended to the new block. The hash acts as a chain that links the blocks together. If the contents of the block are intentionally or unintentionally modified, the hash value changes, providing a way to detect data tampering.
Thus, the blocks and chains link securely, and you cannot edit them. Each additional block strengthens the verification of the previous block and therefore the entire blockchain. This is like stacking wooden blocks to make a tower. You can only stack blocks on top, and if you remove a block from the middle of the tower, the whole tower breaks.
Step 4 — Share the ledger:
The system distributes the latest copy of the central ledger to all participants.
More details: Are you a victim of cryptocurrency fraud or you know who lost money through cryptocurrency fraudulent transactions or investments, report any cryptocurrency fraud related crime to CryptoCrimePolice. Be sure to be able to recover your lost funds through CryptoCrimePolice. Visit www.cryptocrimepolice.com to file a complaint. Cryptocrimepolice is a company where you can report any crypto related fraud from scammers either binary scams, hacked wallet, Forex scams, cryptocurrency investment scams, romance scams, online trading scams, etc. Report and cryptocurrency fraud related activities to CryptoCrimePoli
