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Blockchain — What Does It Mean in Crypto?

Crypto Glossary by ChangeHero
Author: Catherine
Created:
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In cryptocurrency, a blockchain is a decentralized digital ledger that records transactions in a secure, transparent, and immutable way across a network of computers. Instead of a central authority like a bank, transactions are validated by network participants (nodes) through a consensus mechanism, then grouped into chronological "blocks" that are linked together to form a secure and tamper-proof "chain". This technology ensures the integrity of cryptocurrency transactions and eliminates the need for intermediaries, providing a trustworthy system for all users.

How blockchain works

  • Blocks of Data: Transactions are grouped into "blocks".
  • Cryptographic Links: Each block contains a cryptographic hash of the previous block, creating a secure, chronological chain of data.
  • Decentralized Network: The blockchain ledger is not stored in one central location but is distributed across a network of computers (nodes).
  • Consensus Mechanism: To add a new block of transactions to the chain, the majority of nodes in the network must agree on its validity through a consensus process.
  • Immutability: Once a block is added to the chain, its data becomes virtually unchangeable, making the ledger resistant to tampering and providing a permanent record of all transactions.
  • Transparency: All participants on the network have access to the same information, providing a transparent and verifiable record of all cryptocurrency transactions.

Why blockchain is important for crypto

  • Security: The cryptographic nature and decentralized structure of blockchain make it very difficult for hackers to alter or tamper with transaction records.
  • Trust: By eliminating the need for a central authority, blockchain creates a trustless environment where participants can conduct transactions securely.
  • Transparency: The open and shared nature of the ledger ensures that all verified transactions are visible to everyone on the network.
  • Efficiency: Blockchain streamlines financial processes by removing intermediaries, which can reduce costs and increase efficiency in cryptocurrency exchanges.

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