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How Blockchain Technology Works

A blockchain is an element of software that is designed to build decentralized databases. The software is "open source" which means that anyone can view, edit, and suggest changes to the code base. While it's become more popular due to Bitcoin's rise it's actually been in use since 2008, which makes it 10 years old (ancient in terms of computing).

The most significant aspect of "blockchain" is it was created to make applications that do not require a central processing service. This means that, if you're using a platform built upon this (namely Bitcoin) – your data will be stored on a multitude of "independent" servers all over the globe (not managed by any central agency).

The method by which the blockchain technology companies operate is through the creation of the "ledger". The ledger lets users create "transactions" between each other with the data of the transactions stored in fresh "blocks" in every "blockchain" database.

Image Source: Google

Based on the application that is creating the transactions, they must be secured using different algorithms. Because encryption employs the technology of cryptography in order to "scramble" the information stored in each "block" that is why the phrase "crypto" refers to this method of securing any blockchain data that the application could generate.

To fully comprehend the mechanism behind it and how it functions, you must understand the fact that "blockchain" isn't a brand new technology, it's just using technology in a unique method. It is a data graph referred to in the form of "Merkle trees". Merkle trees are essentially ways for computer systems to store chronologically ordered "versions" of a data set, allowing them to manage continual upgrades to that data.