What Is Blockchain: How It Works And Its Differences From DLT
Bitcoin and the other alt coins that have been dominating around the world as an alternative to paper money. Nowadays, more and more people have become aware of the uses of these digital coins since a lot of people are opening digital wallets to keep them. As cryptocurrencies are getting a lot of popularity, people have been hearing the term “blockchain”. Thus, most of them ask “what is blockchain?” and “what is its relation to crypto coins?”. However, a blockchain is not just for cryptocurrencies and that is what will be discussed as you read on.
What is Blockchain?
Knowing the answer to what is blockchain is quite simple since it is already in the name. It is blocks of information that are chained together. A blockchain functions similarly to a database since it also stores data digitally. However, a blockchain is a distributed type of database and is shared among nodes, which are found in high-performing computers.
People commonly define a blockchain to be an online digital ledger. Since data on the digital ledger transactions are distributed, blockchains are decentralized. This important feature of blockchains disables hackers from manipulating or editing the data stored. Thus, it is a more secure way to store online transaction information compared to third-party centralized online database ledgers.
How does Blockchain work?
The process of how blockchains work is also in its name. Whenever new pieces of data are uploaded to the blockchain, a new block forms. The new block of information that has reached its full storage is then automatically linked to the previously created block of information. Afterward, the process repeats itself forming a chain of information blocks hence its name.
However, before a new block can be added to the chain, it needs to be confirmed by multiple nodes. Once the legitimacy of the block’s data is confirmed, only then it will be added to the chain. This is why a blockchain is a great ledger for cryptocurrencies. A fake crypto transaction is easy to detect and be invalidated. This technology is also referred to as Digital Ledger Technology or DLT.
What is the difference between Blockchain and DLT?
A blockchain is a Digital Ledger Technology but it is not always the case the other way around. A DLT also functions similarly to a blockchain with slight differences. A DLT can be centralized while a blockchain cannot. Also, a blockchain undergoes cryptic validation while the other doesn’t need it, especially when users try to access data.
Future of Blockchains
Although blockchains are used on crypto coins, experts are thinking of other ways to use them. Since it is nearly unhackable, many aim to use them in banks, asset transfers, and voting. Furthermore, they can also be used as storage of valuable data. Thus, it is certain that blockchain will have a long future up ahead.
* We hope this information will help you in your investment process, but this is not investment advice. Every investment carries risk, especially in this industry, so DYOR before making a decision.