Some persons may know exactly what bitcoin is and maybe even quick to tell you why buying this digital currency some years back would have been a smart financial move. Hindsight is 20-20 they say, and predicting the past is quite easy. When it comes to explaining the technicality behind bitcoin, most persons will shy away. In some cases, they may not have even heard the term blockchain. The blockchain is the technology that validates all bitcoin transactions.
How to ensure that a person does not spend the same coins
In developing a digital currency, it was also necessary to develop a technology that will monitor transactions involving that currency. One of the challenges that digital transactions faced was how to ensure that a person does not spend the same coins twice for different commodities. From the time of its launch, bitcoin had solved this problem.
How does Blockchain work?
The bitcoin developers solved this problem without any help from the government using the blockchain technology. This technology prevented double transactions using the same coins. How does this technology work though? It is quite simple. Bitcoin operates a decentralized system for validating transactions. That means that instead of using a centralized computer to validate and store the trace of every transaction bitcoin uses individual miners using their various computers to carry out the mathematical computations to validate each transaction.
The miners validate transactions
The miners use their computers to validate transactions involving bitcoin. The mining process involves solving equations to match keys used in a transaction. Once matched, the miner is awarded a coin for his effort. Before the transaction is validated, other miners will have to confirm that the coins used in the transaction were not used in other transactions. Once this is done, the transaction is stored in a confirmed batch known as a block and then transferred to a public ledger stored in a chain of other transactions. The more the chains involved in a transaction, the harder it becomes for a hacker to replicate a transaction and spend money twice. This technology not only prevents double spending, it also prevents counterfeiting.
Blockchain technology in various businesses
A lot of big companies are now trying to apply the concept of blockchain technology to their various businesses. Walmart has tried to apply this technology in its stores to ensure food safety. This blockchain technology is also touted to be what the fintech industry needs to move to the next level.
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