The issue of centralization is addressed by blockchain technology. It's a mechanism for everybody to keep notes without the need for a single authority, a decentralized way to keep a LEDGER that's almost impossible to falsify. It's difficult to break the rules without getting heard because there are so many people watching and checking all that's going on. Perhaps you're curious why it's named blockchain. Assume we're managing a shared ledger of hundreds of pages of data. Each page starts with a rundown of the previous page. If you change the summary on the current version, you'll have to change the summary on the previous page as well. As a result, the pages are technologically joined or chained together. Since each block is connected to the data of the previous block, we have a chain of blocks, also known as a blockchain. Many people believe the blockchain technology was developed by Satoshi Nakamoto, the mysterious Bitcoin creator. Technically, he just built the first real-world Bitcoin implementation. In reality, Satoshi's initial white paper never mentions the term blockchain.
How Does A Blockchain Work?
The first requirement for a blockchain is a peer to peer network, which is a network of similarly privileged computers known as nodes. Anyone and everyone is invited to attend. This is essentially what the Internet provides us with now. We need this network in order to connect and exchange information with one another remotely.
The second requirement to consider is cryptography. The art of safe communication in a hostile environment is known as cryptography. It enables us to double-check tweets and show the validity on our own. Because of the first variable, we need cryptography even when malicious players are present. It's good that we can communicate, but we must still guarantee that our contact is unaltered.
The third requirement is a consensus algorithm. This means we'll need to settle on the rules for adding a new page to our records, also known as a block. Consensus laws come in a variety of shapes and sizes. In the case of Bitcoin, we use a consensus algorithm called proof of operation. This algorithm specifies that in order to gain the right to add a new page to our ledger, someone must solve a math problem that necessitates the use of computing resources to solve machines around the network, run simulations to solve the math problem, and consume a large amount of energy in the process. To put it another way, they put in a lot of effort. That's why, when one of them discovers the solution number and broadcasts it to the network, they're essentially showing a proof of work. This is the type of algorithm that the Bitcoin network uses. Different algorithms have advantages and disadvantages, but you must use one to run a decentralized ledger. Otherwise, finding a consensus with too many participants in the network would be incredibly complicated.
Finally, the reward. This aspect is taken from game theory, and it means that people can still obey the rules of their best interests. So far, we've built a network with a stable communication system and a set of guidelines for achieving a consensus. Now we'll tie it together by rewarding people who support us keep track of our documents and add new pages. Each when a consensus is reached and a new block is attached to our chain, this reward is given in the form of a token or coin. At that point, the value of the blockchain's coin normally starts to rise. It's impossible to pinpoint what drives widespread consumer penetration. In the case of Bitcoin, it all began with its use on the Dark Web, where it was used to pay for drugs and other illegal items. However, since then, more people have started to explore bitcoin and blockchain and have discovered the advantages they provide, whether in practice or as an investment.
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