If you’re thinking about investing in cryptocurrency, you’ve likely heard that of the technological innovation that backs this unique investing method: blockchain. This technology is actually surprisingly simple, but the implications for our modern financial system can be quite complex. Looking to get started on the basics of blockchain? Read on for more insight, and check out our series of articles on investing with cryptocurrency to feel confident before you make your first totally digital investment.
Blockchain Basics
To put it most simply, blockchain technology is a system that stores and groups pieces of information across a peer network of personal computers. When it comes to cryptocurrency, this information is best thought of in terms of transactions of currency between individuals across this network. Each transaction that you make using currency becomes recorded in “blocks.” Because no one person or agency controls the information, it cannot be altered by any one person or agency, either. This means that transactions are secure and distinct, and are essentially “watched” by all the other users in the blockchain.
Every transaction is recorded in the chain, which goes back to the very first transaction. It is virtually impossible to create counterfeit currency and transactions using this system, because to do so, an individual would need to recreate every single transaction, and somehow do that without being detected by all of the other participants in the chain.
How Blockchain Powers Cryptocurrency, and The Future
Unlike traditional banking, which involves depositing currency into a bank or credit union, which is typically insured by the Federal Deposit Insurance Corporation (FDIC) and/or supported bu the Credit Union National Association (CUNA), cryptocurrency investments instead are secured by blockchain technology. When you purchase a form of cryptocurrency (for example, Bitcoin), that transaction will become an entry in the digital ledger, or the “block.” This is a unique kind of digital fingerprint that helps keep your transaction safe, secure, and protected from prying eyes or those wishing to create counterfeit currency.
Proponents of blockchain technology point to the way that the shared network can allow for greater transparency in a range of systems, from decentralizing banking to helping clear up unnecessary red tape in getting foreign aid to countries or communities in crisis. While there are many possible uses of blockchain in the future, for now, investments are primarily where blockchains are being used. In the future, this digital ledger system might not only harness the power of a peer to peer network, but it also might help us rethink how we share and record important data in a range of settings and industries.
Ready to invest know that you understand the basics of blockchain? Before you take the plunge, read up on our series of articles on crypto and blockchain basics here at Block to Stock. We’ll help you get a solid foundation before you move into the exciting world of blockchain technology and cryptocurrency.