How to Understand Blockchain Technology

What is Blockchain

Blockchain is a shared ledger that records transactions and tracking assets. Blockchain is usually used in business-based situations. When blockchains are used to track assets, they usually track almost anything that holds value, from produce to car parts. Blockchain helps businesses improve by creating data. Specifically, Blockchain can allow the tracking of packages, which allows shipping companies to find the best drivers and routes.


How Secure are Blockchains and How do They Work

Blockchains are very secure, so secure that it is difficult to explain how it encrypts financial transfers and assets. Blockchains encrypt assets by using a hash method. The Hash encryption uses the SHA256 algorithm, which creates a form of crypto puzzle that requires a high-end computer to solve. The encrypted data is then added to the blockchain.

 

The process of encrypting assets requires five main steps. The first is previous hash encryption to build off of. The second is the hash recognizing all the required data to encrypt. The third is the hash’s Nonce a random number to protect the IP source. The fourth is the Encryption using all the previous steps to create a Hash Address for the block. Then a Miner tries to solve the crypto puzzle and once they solve it it is added to the blockchain.

 

What are the Common uses for Blockchain?

Blockchains are commonly used to develop Cryptocurenccys and NFTs. Other than that blockchain allows for a decentralized form of money transaction. Meaning that you don’t have to get permission from the government or bank to transfer funds to someone. Also, there isn’t a limit on transfers like wire-based funds have.

 

How does cryptocurrency use blockchain?

Cryptocurrency like Bitcoin uses blockchain to transfer and encrypt digital transactions. They do this by having mining rigs set up to process and encrypt the transfer of funds. After the miner solves a complex puzzle that block is added to the blockchain. The transfer of bitcoin usually requires a lot of computing processes to solve the digital puzzle, therefore making an encrypted transfer of money.

 

How do NFTs use Blockchain?

NFTs or non-fungible Tokens use blockchain to encrypt the Token. The process is similar to Cryptocurrency to secure. However, unlike Crypto NFTs encrypt a key that can only be used by the owner of the token. NFTs use the encrypted parts of a blockchain for security not primarily for transfer. Blockchain acts in the same way here. Blockchain solves a difficult puzzle then adds it to the blockchain and secures the NFT.

 

Types of Blockchains

Public Blockchain Networks

Public Blockchains are blockchains that the public can use freely. These are commonly cryptocurrencies like Bitcoin or Ethereum. Public Blockchains allow for a decentralized form of asset transfer. The blockchain is usually spread out, unlike blockchains that are stored solely in one place.

Permissioned Blockchain Networks 

Permission Blockchains are usually controlled by organizations and businesses. This type of blockchain creates a controlled environment for the company or organization. They control who gets to use it, usually only people who have the authorization to use the network.

Private Blockchain Networks

Private blockchains are closed-off networks. Usually, private companies use this type of network. These private organizations have the advantage of customizing security options, including who is permitted on the network and how accessible the blockchain is. This type of blockchain is more centralized than the standard form of a blockchain.

Consortium Blockchains                 

Consortium Blockchains are similar to permission-based blockchains, however, this network allows for private and public transactions. This may sound unorganized, but Consortium Blockchains allow for many organizations to manage this network. These networks are often complex. Eventually, they get better when it gets running.