The technology used to track cryptocurrency transactions is blockchain technology.
That answers the question, but that answer brings up even more questions. And this article will answer all the questions you ever had about blockchain technology.
We’ll cover topics that range from how cryptocurrency uses blockchain technology to record transactions, how to access the blockchain, and what cryptocurrencies use blockchain technology.
What is blockchain technology? And what does blockchain technology have to do with cryptocurrency?
We already covered the technology used to track cryptocurrency transactions – blockchain. But that doesn’t answer much of the question.
This section will detail exactly how cryptocurrencies use the blockchain.
First, we have to explain blockchain technology. Don’t worry, it’s not difficult to understand the basics.
In simple terms, blockchain technology is a digital ledger. Blockchain refers to the digital ledger itself.
Basically, cryptocurrency is only as valuable as its ledger (blockchain) because that ledger has every single one of that cryptocurrency’s transactions on it. It also has the wallet balances of every cryptocurrency wallet ever created on it.
That’s a lot of information.
Think of the blockchain as the server of your bank, but distributed across computers all over the world rather than controlled by any single individual or group. These computers power the blockchain, but they can’t change it due to the encryption of the blockchain.
The blockchain is also 100% public, which we will cover in the next section.
To answer the second question, the blockchain logs your transaction when you send money to another wallet. That means your wallet, located on the blockchain (ledger), has cryptocurrency added to its balance.
So, that’s a basic summary of blockchain technology. It’s obviously a little more complicated than that for the details on how it works. However, the general concept is all you need to know to understand how it works.
How to access the blockchain?
We briefly mentioned it in the previous section – the blockchain is publicly available.
It’s the same as if your bank balance and all previous transactions to and from your account were public.
It might sound dangerous, but your name is not attached to your wallet. You can also have as many wallet addresses as you wish to reduce the ability of users to track you.
Anyway, you can access the blockchain at Blockchain.com. They have access to the Bitcoin, Ethereum, and Bitcoin Cash blockchains, and you shouldn’t have any problem finding a transaction of those cryptocurrencies.
Every single transaction in the history of the cryptocurrency will be on that website.
If you need to find the blockchain of a different cryptocurrency, then it’s as easy as doing a Google search of “[your cryptocurrency] blockchain.”
Which cryptocurrencies use blockchain technology?
It’s easier to say the cryptocurrencies that do not use blockchain technology to track transactions:
There are likely a few more, but IOTA is the most well-known cryptocurrency that does not use blockchain technology to record transactions.
Instead, IOTA uses Tangle technology to record transactions, which is very similar to blockchain. For beginner purposes, Tangle is essentially a blockchain with very minor differences.
Other than IOTA and a few other exceptions, all cryptocurrencies use blockchain technology to record transactions.
Why do cryptocurrencies use blockchain technology to record transactions?
There are a few reasons that cryptocurrencies use blockchain technology.
First, the first cryptocurrency – Bitcoin – used blockchain to record transactions. And Bitcoin has some first-to-market bias because it was the first cryptocurrency on the market.
In other words, everyone pretty much copied Bitcoin’s technology because it worked so well.
Next, blockchain fits the goals of cryptocurrency nicely. Why?
- It’s very secure.
- It’s decentralized.
- It has low transaction fees.
- It’s reasonably fast.
The fact blockchain fits the goals of cryptocurrency shouldn’t surprise you – blockchain was invented for Bitcoin.
Finally, no better alternative for the blockchain exists at the moment. The IOTA project is working on a new technology with the Tangle, but it does have some issues that the blockchain simply does not have.
Most notably, the Tangle is not nearly as secure as the blockchain because transactions require less verification. Granted, IOTA is designed for devices attached to the Internet of Things (IOT) more than human use, so the extra security features aren’t as necessary.
That said, the blockchain might not last forever. If someone creates a better solution, then we should expect that to become the dominant technology used to track cryptocurrency transactions.
It’s just that no better technology has been created in the past 11 years. And it does not appear that a better technology will be created anytime soon.
Are transactions recorded on the blockchain permanent?
Yes. All transactions recorded on the blockchain are permanent and immutable. They can’t be changed or reversed.
The immutability of the blockchain is a double-edged sword. It’s great because no one can change it or reverse a transaction. However, if you fat finger a transaction or get scammed, then you have no recourse.
All things considered, most people prefer an immutable platform because they don’t have to worry about reversed transactions, chargebacks, or hacks. As written earlier, you just have to be careful before doing a transaction because you have no recourse in the event you messed something up.
Is the blockchain secure?
Yes. The blockchain is very secure.
The amount of encryption the blockchain uses makes it virtually impossible to crack, which means it’s much more secure than your bank account.
However, that does not mean coins never get stolen. Just like with everything else, you still must keep your access keys to your wallet secure. You don’t have to worry about a data breach, though.
We hope we answered everything you need to know about the blockchain technology used to track cryptocurrency transactions. It sounds complicated when complicated words are used to explain it, but it really isn’t that difficult to understand if you think of it as a digital, decentralized bank ledger.
On top of that, blockchain technology is far superior for tracking cryptocurrency transactions than any of the alternatives.
All in all, you really only need to know that the blockchain is used to track cryptocurrency transactions.