What Is Blockhain and How It Works?

Blockchain, sometimes referred to as distributed ledger technology (DLT), makes the history of any digital asset unalterable and transparent through the use of a decentralized network and cryptographic hashing.

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Blockchain is the innovative database technology that’s at the heart of nearly all cryptocurrencies. Many people know it as the technology behind Bitcoin. While cryptocurrencies are the most popular use for the blockchain at present, the technology offers the potential to serve a quite wide range of applications. 

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What is Blockchain?

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A blockchain is a decentralized ledger of all transactions across a peer-to-peer network. Blockchain technology enables everyone involved in a transaction to know with certainty what happened, when it happened, and confirm other parties are seeing the same thing without the need for an intermediary providing assurance, and without a need to reconcile data afterwards. Thus, using this technology, participants can confirm transactions without a need for a central clearing authority. As a database, a blockchain stores information electronically in digital format.

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One key difference between a typical database and a blockchain is how the data is structured. A blockchain collects information together in groups, known as blocks, that hold sets of information. Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block, forming a chain of data known as the blockchain. As new data comes in, it is entered into a fresh block. Once the block is filled with data, it is chained onto the previous block, which makes the data chained together in chronological order. 

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It's crucial to understand Distributed Ledger Technology (DLT), the foundation that supports blockchain, because the terms "blockchain" and "DLT" are frequently used interchangeably.

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What is Distributed Ledger Technology?

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DLT is a decentralized database managed by multiple participants, across multiple nodes. Blockchain is a type of DLT where transactions are recorded with an immutable cryptographic signature called a hash. As mentioned above, transactions are then grouped in blocks and each new block includes a hash of the previous one, chaining them together, hence why distributed ledgers are often called blockchains. Since blockchains are transparent, every action in the ledger can be easily checked and viewed, creating inherent blockchain security. Each participant is given a unique alphanumeric identification number that shows their transactions.

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Currently only a very small proportion of global GDP (around 0.025%, or $20 billion) is held in the blockchain, according to a survey by the World Economic Forum’s Global Agenda Council.

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But the Forum’s research suggests this will increase significantly in the next decade, as banks, insurers and tech firms see the technology as a way to speed up settlements and cut costs.

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Popularized by its association with cryptocurrency and NFTs, blockchain technology has since evolved to become a management solution for all types of global industries. Today, you can find blockchain technology providing transparency for the food supply chain, securing healthcare data, innovating gaming and overall changing how we handle data and ownership on a large scale.

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Blockchain Evolution

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The first concept of blockchain dates back to 1991, when the idea of a cryptographically secured chain of records, or blocks, was introduced by Stuart Haber and Wakefield Scott Stornetta. Two decades later the technology gained traction and widespread use. Furthermore, the year 2008 marked a pivotal point for blockchain, as Satoshi Nakamoto gave the technology an established model and planned application. The first blockchain and cryptocurrency officially launched in 2009, beginning the path of blockchain’s impact across the tech sphere.

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Disclaimer: All information provided in the content is for informational purposes only and should not be perceived as investment, financial, or trading advice. Any investment decisions you make should be based on your personal preferences, financial expertise, and market research.‍

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About

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Parea Labs is a Web3 Gaming company that is driven by visionary ideas to provide various blockchain solutions and the excitement to build a user-focused, adaptive, and innovative gaming experience for all.