If your social circle consists of some entrepreneurs or technology updated people, then you must have heard about the evolving digital currency or better known as cryptocurrency. Unlike fiat currency, it is software based and uses a network of blockchain systems in a decentralized financial system.
What is a blockchain network?
The term blockchain network refers to the infrastructure of information that is collected together in groups, which are known as blocks. Every block contains specific data in digital format.
This network of blocks is associated with storing information for cryptocurrency. The currency is available in software form go and check.
A blockchain network provides a way of storing data in such a manner that it becomes nearly impossible to alter or reverse it.
The database is distributed among the linkage of computers attached peer-to-peer. Any kind of alteration in one node leads to update in all of the attached computers thereby increasing the transparency without involvement of any intermediary.
What are the types of blockchain networks?
Presently, there are four types of blockchain networks. The division is based on the accessibility of information. They include:
1. Public Blockchain
It refers to the distributed ledger which is accessible to all the nodes. It has no restrictions. It provides security and transparency but reduces the efficiency of the system because of availability to all nodes.
2. Private Blockchain:
This type of blockchain deals with the permission which is operated under one entity. It is best suitable for any organisation. It is comparatively speedy but lacks the element of transparency.
3. Hybrid Blockchain:
It is a combination of private and public blockchain systems. The accessibility changes according to the needs. It provides partial transparency.
4. Federated Blockchain:
This type protects some information while keeping the other viewable to everybody.
How does blockchain network work?
The blockchain network, also known as distributed ledger technology, works by purchasing and selling the cryptocurrency. This buying and selling is entered in the form of information into computers or nodes.
The information is then updated on thousands of connected nodes using particular algorithms. As soon as the trade is completed, it is stored in the form of block and added to the chain of already consisting blocks. This results in the formation of a blockchain network. The change in this linkage is irreversible and inalterable.
How safe is the blockchain network?
The blockchain network does not involve any third party which makes it quite safe and reliable. This system provides transparency as every single transaction that is made on this network is accessible to all the users. Therefore, nobody can commit theft in a digital market. Moreover, the information once stored cannot be inverted. It is difficult to destroy, delete or make changes to it. Hence, the blockchain network has won the trust of users by increasing the clarity.
What are the benefits provided by blockchain networks?
The blockchain network has provided a number of benefits to the users.
The blockchain network does not involve the work done by humans. It reduces the chances of human errors and improves accuracy.
Unlike centralized finance, where banks are central authority, a digital market does not involve third party. Therefore, the transactions are always carried out free of charges which leads to cost reduction.
The peer-to-peer connection and easily accessible data makes it more secure and reliable.
Since the transactions made are updated on all the nodes, the blockchain network provides the users with high transparency.
What are the risks associated with the blockchain system?
The blockchain network is quite advantageous on one hand. On the other hand, there are some risks associated with it.
- Unlawful actions: Since there is no intermediary and users are not accountable, the blockchain network can be used for illicit means such as money laundering or drugs trading.
- Lack of regulations: The fiat currency underpins governmental laws. The cryptocurrency lacks rules and regulations which can make it riskier.
To close it in a nutshell, a blockchain network provides the users with information that is stored in the form of blocks that are not changeable. The network provides benefits but also poses a few risks.