Blockchain Technology in the Finance Sector Explained
For those of you who don’t know what the term “blockchain technology” is, it is short for the term “distributed ledger”. A Distributed Ledger is a record that is maintained and secured on the Internet. It is comprised of a large group of computers, and these computers are connected to one another via a network, which makes it very difficult for someone to steal your money.
Blockchains allow multiple parties to trust one another so they are able to conduct business without any third parties being involved. This is similar to how a bank records their money on the Internet. A person can purchase what they want to buy and then go to a bank and say: will give me this check via an electronic transfer to a bank account where the bank instructs them to debit this account to pay me.
What a “Blockchain” does differently is that it uses a distributed network of computers which keep all transactions secure. There is no single computer where it all happens, instead it occurs at various computers. The only thing that is known to an outside party about what is happening on the distributed ledger is the public key which is used to access it.
One important thing to note about this type of ledger is that it is very much like the internet in some ways. The internet itself is a distributed ledger system that uses several servers to maintain the information and make sure that it is safe.
What is going to happen here is that when a user wants to send an electronic transaction, such as purchasing a product, they will enter in their public key. This allows all computers in the network to read this public key and then let out what they know.
An important part of what is happening here is that each computer in the network has its own copy of the public key. This makes it very difficult for anyone to change the key, which means that only the owner of the public key is allowed to read it.
The next step is that a third computer, known as the Authoritarian node, then reads this public key. It then verifies if the key given by the user is legitimate and removes it from its database.
This Private key is then used by a third computer called a Supernode to create a copy of the public key and then gives the data back to the other computers on the network. Then this information is passed to all of the other computers and then it is passed back to the Authoritarian node, which sends it to other Supernodes.
At this point, all of the authorized users are able to view the entire ledger. They can look to see if the data they are looking at is correct or not.
Since all users have the same private key, no one can access other people’s data. Therefore, everyone is able to see the data.
The most important thing to know about this is that because the network is so huge, it is able to handle a lot more transactions than a traditional ledger system. In fact, it is able to process a billion dollars worth of transactions per day.
You might be asking: why would anyone need to create an actual ledger? Well, it is because they do not trust one company to maintain the database that is needed for their financial transactions.
They want to make sure that they are able to check that the information they are receiving is completely true. Therefore, the block chain makes it very easy for them to make this check.
This is why a lot of banks use the network in order to ensure that they are able to complete the entire transaction process without any errors. When one of these transactions takes place, they do not have to worry about whether the other person is telling the truth.
There are several reasons why a person might want to create this ledger. If you are interested in how this works, the best way to learn about it is to research the topic.
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