Crypto currency and its regulation — Overview
BLOCKCHAIN A BEGINNER'S GUIDE
Block chain is a familiar word that we constantly come accross when we research about Bitcoin. A blockchain is a digital ledger stored across many computers instead of one central database.Before further diving into the ocean of Blockchain let us get a quick understanding of its working
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Transaction Creation - A user initiates a transaction
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Verification- Transactions are verified by a network of computers (nodes).
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Block Formation - Valid transactions are bundled into a block.
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Consensus & Addition to Chain- The block is validated and then added to the blockchain.
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Immutability & Transparency- Once added, the block is nearly impossible to alter.Now let us try to get an indepth understanding of the concept with a practical illustration
1. Transaction Creation
Imagine A2 Consultants want to send you a Bitcoin, It uses its Bitcoin wallet to create a transaction, signing it with the private key. The transaction includes:
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A2 Consultants wallet address (sender).
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Your wallet address (receiver).
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The amount (1 BTC).
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A digital signature.
2. Broadcasting to the Network
The transaction is broadcast to the Bitcoin peer-to-peer network where thousands of nodes (computers running Bitcoin software) receive it.
3. Verification
Nodes check whether A2 Consultants really have 1 BTC in its wallet? And whether its digital signature is valid? and then conclude on the legitimacy of the transaction
4. Block Formation
Miners collect this transaction along with others into a new block. Each block contains:
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A list of transactions.
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A reference (hash) to the previous block.
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A new cryptographic hash.
5. Mining (Proof of Work)
Miners compete to solve a complex puzzle and the first to solve it adds the block to the Bitcoin blockchain. For their effort, the winning miner receives: Block reward (newly minted BTC) and Transaction fees (including Alice’s fee).
6. Block Added & Confirmation
The new block (containing our payment) is added to the blockchain and once your wallet sees enough confirmations the transaction is considered final and irreversible.
Key Features
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Decentralization – No single central authority controls the network.
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Transparency – Anyone can verify transactions.
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Security – Cryptographic hashing makes it tamper-resistant.
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Immutability – Transactions can’t be retroactively changed.
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Programmability – Smart contracts (on platforms like Ethereum) allow automation.
Types of Blockchain
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Public Blockchain- They are open to everyone and fully decentralized
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Private Blockchain- Generally has restricted access, usually for businesses
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Consortium Blockchain- These are controlled by a group of organizations
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Hybrid Blockchain- It is basically a mix of public and private blockchains
Blockchain is a widely used concept for its advantages including transparency security and decentralization. Considering these advantages the usage of this concept is not only limited to Bitcoin and cryptocurrencies but also Smart Contracts, Supply Chain, Healthcare, Voting Systems, NFTs & Metaverse (digital ownership).
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