You won’t need to engage an expensive intermediary for exchanging value or transacting money securely by means of a global network. The ability of a financial system in transferring value is replicated by digital currencies like Bitcoins through an effective blend of cryptography and game theory. It doesn’t require you to bear all the physical hassles that you usually experience while securing your transactions manually. It lessens the extent to which each party needs to invest trust in the other while transacting money with crypto-currencies. Apart from privacy, it even yields a number of cash transaction features digitally.
Five key principles behind the technology are mentioned below:
- Shared Database
The whole history and database of a block-chain can be accessed by every party. Such information or data doesn’t get controlled by a single party. There’s also no need of any intermediary as all parties can directly verify the transaction record involving partners.
- Peer-to-Peer Sharing
Instead of involving a central node, peers can communicate with each other directly. All nodes acquire information stored by the others.
- Anonymity and Transparency
All transactions and the values associated with them can be checked by everyone who can access the system. It’s easily identifiable by an alphanumeric address worth more than 30 characters referring to a block-chain party. The identity proof of a user can be shared with others or the user may refrain from being identified. A transaction is initiated from one address to end at another.
- Permanent Records
You can alter the records once the accounts get updated. Once a transaction is recorded in the database, it gets linked to all previous records of transactions. That’s why it’s referred to as a chain. In order to ensure that all records in the database are open to others using the same network, ordered chronologically, and stay permanently, certain approaches and algorithms are followed for computational purposes.
- Computing Logic
Block-chain transactions are recorded in a ledger of digital nature. Programming these transactions and developing logic for such computational purposes seems easier as all of them are connected. Transactions are committed from one node to another automatically by following the rules and algorithms set by users.
The financial sector holds some of the key block-chain applications that are dominating the market today. While Bitcoins used cases like that of speculation and trading, the emerging technologies Zcash and Ethereum are assuring an extra layer of privacy. Much of the security and professionalism of digital exchanges and digital wallet issuers have been enhanced due to the improvement of the latest crypto-currency eco-system.
When it comes to cross-border payments, using block-chain technology lowers much of the remittance costs. This is certainly of much help to a consumer. The payment processing techniques used by eminent companies like MasterCard and Visa are quite identical and help in improving the manner in which they process your payments. Some of the digital currency investor businesses are indeed developing a global network for controlling the transaction costs incurred by financial institutions and banks. Under most circumstances, the block-chain technology is the underlying force that both the consumers and business owners are using for reaping profits without really feeling the indulgence of any distributed ledger.