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How Blockchain Technology Works

Over the last few years, the term blockchain has become well-known to most people across the globe after its invention by Satoshi Nakamoto. However, the main question behind everyone’s mind is how exactly does the blockchain technology work? If you have a deep interest in investing, banking, or cryptocurrency, this must be something you’re asking yourself.

In that case, you’ve come to the right place since this article aims to take you through a comprehensive guide on how this technology works. Consequently, you’ll no longer be shocked by this term with this technology, which is thought to complex and whether investing in a DeFi portal is the right decision.

What’s Blockchain Technology?

Before we can dive into how blockchain technology works, you need to understand is what it is in the first place. The simplest definition of blockchain is a time-stamped series of undisputable data records that are managed by a group of computers that don’t belong to one entity. All the blocks of data (blocks) are fortified and held to each other by the cryptographic principle (chain).

Through this invention which is also known as Distributed Ledger Technology, it makes a digital asset’s history transparent and unalterable using cryptographic hashing and decentralization.

How Does Blockchain Work?

Now that you understand that a blockchain is essentially a chain of blocks containing information. Each of these blocks comes with a cryptographic hash with a timestamp, cryptographic hash of the preceding block, and transaction data. While this design seems fairly straightforward, it’s the basic design that protects Blockchain from any form of data tinkering.

The blockchain technology being an open distributed ledge is capable of recording the transaction between two parties efficiently and securely. While it’s being distributed, it gets managed with a peer-to-peer network that woks simultaneously to explain complicated mathematical problems to authenticate new blocks.

After the data is recorded, none of the given blocks can be updated retroactively without altering the subsequent blocks, and this needs a majority’s approval in the network. It’s this innovative concept that makes blockchain technology secure and free from hacking.

This working principle of Blockchain has endeared to many people all over the world and some of the benefits of using it include;

  • Decentralized system: Unlike with conventional currency where you need the consent of regulatory authority such as the government or bank, Blockchain transactions can be completed after a mutual agreement among users. As a result, this leads to faster, safer, and faster transactions.
  • Highly secure: Blockchain incorporates a digital signature feature that allows the conducting of transactions to be done free and fair. As a result, this makes it impossible to try and alter any data of a person by a user who doesn’t have a specific digital signature.
  • Automation capability: This technology is programmable, thereby allowing the automatic generation of methodical actions, payments, and events whenever a certain criterion has been met.

Conclusion

Blockchain technology is no doubt something that has changed the global banking and investing landscape. However, understanding it can be a challenge to many and if you also didn’t understand how this technology works, this article must have been of great help. Now that you clearly understand how it works, it’s up to you to decide whether to invest in DeFi portal.

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