How Blockchain Works
A blockchain is an ever-growing list of records called blocks which are linked using cryptography. Cryptography is a process which encrypts and secures data communication to prevent third-parties from reading private messages. Blockchain technology is most commonly used by cryptocurrencies. This technology has been adapted by Satoshi Nakamoto to create and implement the cryptocurrency called Bitcoin. Blockchain is a distributed ledger available to everyone. Once the data has been recorded in a place, it will not be changed. It works just like a digital notary with timestamps to avoid tampering of information.
Difference between the banking system and the blockchain technology
One example to portray how blockchain works is Wikipedia. Wikipedia is a decentralized free encyclopedia which is fully open to the public. Anyone who can access the Internet can view and update a Wikipedia page, with all edits made being transparently recorded and visible to the public. Similarly to Wikipedia, Blockchain technology is also accessible to the public. Anyone who wishes may view the details of the transaction (e.g the amount of the funds, timestamp, the sender’s wallet address, destination address, etc.). The technology is highly secure as it is almost impossible to tamper or hack the transactions. It provides users with the complete transparency on where their funds go; it is a fully secure authenticated tool which can act as an auditing mechanism, recording and detailing all transactions that have occurred on the relevant chain. Furthermore, transferring funds using Blockchain only takes a matter of minutes.
Banking, on the other hand, is a centralized institution whereby a core institution or group of institutions controlled by the government or a large entity manage all transactions centrally. In this type of system, all data is stored in a centralized data storage available to only the entity with a lack of transparent information accessible to the public. Since it is controlled by a single entity, it is open to hacking, fraud, internal system errors, corruption, and data manipulation. The banking process is also very costly and slow. This can be illustrated when considering the process of sending international payments, for example. Correspondent banks are usually needed so that the beneficiary bank can receive the transfer. Correspondent banking works through an agreement between a foreign and domestic bank whereby a mutual trust is established to enable the domestic bank to make payments or money transfers on behalf of the foreign bank. What is actually happening in the background is the payment is being passed from one bank to another as it is not feasible for other banks to partner with other 1000+ banks worldwide.
Bank Vs. Blockchain
Image from https://www.marutitech.com/blockchain-uses/
How blockchain works
A blockchain is simply a chain of blocks that contains information. Each block has a cryptographic hash of the previous block, a timestamp, and transaction data.
Although the design is simple, it is this design that makes Blockchain invulnerable to data tampering.
Blockchain technology is an open distributed ledger that can record transactions of two parties securely and efficiently. As it is distributed, Blockchain is typically managed by a peer-to-peer network working simultaneously together to solve complex mathematical problems in order to validate new blocks. Once recorded, the data in any given block cannot be updated retroactively without changing all subsequent blocks, which requires the confirmation of the majority in the network. This is the main reason why blockchain technology is secure and not susceptible to hacking.
How to read a transaction history in a blockchain explorer?
All blockchains use a hash. Hashes are long series of random strings used to track your transaction.
With the use of transaction hash or a wallet address, anyone can check the details of their transaction.
Go to Lykke Blockchain Explorer and enter your wallet address in the search field.
You may find the transaction hash to check the status of your transfer. Please note that to pass successfully, your transaction should receive a certain amount of confirmations. The confirmation will turn to green when it was successfully processed. You will find the sender’s wallet address and the destination wallet address together with the amount and the fees of your transfer.