You may feel intimidated by concepts like the blockchain, but the truth is this technology is quite easy to understand if you look at its core concept. The blockchain is just like any database that includes information stored digitally on computer systems. In a database, such data will be typically in a tabular format so that you can easily search for data. The database can be filtered, accessed, and even manipulated by users. The blockchain however, is not identical to a database.
One of the key distinctions between a blockchain and a regular database is the manner in which data is structured. The blockchain will collect data in blocks and these have storage capacity. They get chained to the previous block to form what is called the blockchain. When new information gets added through a new block, it is automatically added to the chain. So, a blockchain is a database but a database is not necessarily a blockchain. Every block inside this chain has an exact timestamp.
What is the relationship between the blockchain technology and crypto trading?
Just like databases, cryptocurrencies require a set of computers for storing the blockchain. So, for crypto coins like the Bitcoin, the blockchain is really a database for storing all Bitcoin transactions. But these computer or “nodes” as they are called will not be in one location; they are spread across the globe. They are run by individuals or different groups of people. Every node or computer has a complete record of data stored in the blockchain. If any node has a mistake, it can be corrected because it has millions of nodes for reference. So, no single node can change data in it and this makes the transaction history in all blocks making up the crypto blockchain irreversible. If any user tampers with the records, the other nodes can cross-reference one another and detect the node with the error. This guarantees transparency which allows the blockchain to contain data like company’s product inventory, legal contracts, etc. To make a change, a huge amount of computing power will be required.
Since the Bitcoin blockchain is decentralized, anyone can view the history of transactions. Every node has a copy of the blockchain and this gets updated whenever new blocks get added. So, you can actually track your crypto coins wherever they go. There have been instances of crypto exchanges getting hacked and people losing their Bitcoins. While you cannot know who the hackers are you can trace the destination of the stolen coins if they have been spent somewhere or shifted.
Blockchain technology provides a high degree of security and trust. This is because all new blocks are stored chronologically; once a block is added, you cannot go back to change its data unless the majority agrees to it. So, even if a hacker wants to alter this blockchain, the change will not be in alignment with the data in other nodes. When users start to cross-reference their copies, they will realize that one block is different. It is then declared as illegitimate. For a hacker to be successful he would have to control almost 51% of the blockchain in order to make his own copy the majority copy. Any attack like this demands a huge amount of power and resources that is impractical.