Cryptocurrency is continuing to rise in popularity all over the world. Some see this digital or virtual currency as the future of the majority of monetary and banking transactions. For the most part cryptocurrency is run through decentralized systems using blockchain technology. So, how do those working with cryptocurrency keep records? It’s simple, a public ledger connected to blockchain systems. Let’s take a closer look at cryptocurrency public ledgers.
Information Storage
When cryptocurrency is exchanged by transferring cryptotokens the public ledger is a one-stop record keeper according to Investopedia:
“The public ledger is used as a record keeping system that maintains participants’ identities in secure and (pseudo-)anonymous form, their respective cryptocurrency balances, and a record book of all the genuine transactions executed between network participants.”
Think of it as transferring money to your bank account or a friends, via check or online transaction. Overall, public ledgers work the same way as bank records however, there are some differences. Transaction details can be verified and queried by those participating in the transaction; no know can know the identities of the participants but those involved. Basically, there’s no central authority that controls or provides upkeep for the ledger.
Who Keeps it Up to Date?
If the public ledger for cryptocurrency is seen as a data management tool, who keeps it up to date? This is where blockchain comes in to help. Blockchain is a way to keep records of transaction history via blocks or chains of information. Once one block is filled with information, new blocks are mined and added to the entire blockchain by network participants (aka miners). There are hundreds or thousands of miners that have a copy of the ledger. This makes it easy to know the status of who owns cryptotokens and if transactions are authentic or not.
There are some challenges that come with public leaders such as hackers, governments, and others knowing exactly what’s happening. This can take away some of the anonymous benefits that come with using the blockchain. Capacity is also an issue because everything is recorded (naturally leaving a lengthy record). Those within this field will have to work to scale capacity of storage and processing. Over time we will see how this develops and the cryptocurrency market adapts.