Blockchain technology can be described as a type of distributed ledger technology, which refers to databases maintained by multiple parties rather than just one. The information stored on blockcha
ins is organized into blocks, and these blocks are linked together using cryptographic hashes, creating a chain of blocks. The data stored in these blocks is immutable, meaning it cannot be altered.
It's important to note that blockchain technology is not synonymous with cryptocurrencies. While cryptocurrencies are digital assets or forms of money, they run on blockchains and other types of distributed ledger technology. For instance, the Bitcoin blockchain network is where the bitcoin (BTC) cryptocurrency operates, while the Ethereum blockchain supports ether (ETH), which is its native cryptocurrency.
The Basics of Blockchain Technology
At its core, blockchain technology is a type of decentralized ledger. Unlike traditional databases that are controlled by a single entity, blockchains are maintained by a network of participants. This makes them more secure, as there's no central point of failure.
Centralized databases are problematic because they're vulnerable to hacks, and they often give companies ownership and control over user data. In contrast, blockchains provide transparency, as each node in the network has its own copy of the ledger. This makes it nearly impossible for bad actors to tamper with the data.
So how do all the nodes in a blockchain network reach a consensus on the state of the ledger? This is where blockchain consensus protocols come in. These protocols define the rules for how nodes agree on a single transaction ledger. For example, Bitcoin uses the Nakamoto consensus protocol, which employs a proof-of-work system to validate transactions.
While blockchain technology is often associated with cryptocurrencies, it has many other potential applications, such as supply chain management and voting systems. As the technology continues to evolve, it's likely that we'll see even more innovative use cases emerge.
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