Blockchain transactions are something that every single cryptocurrency holder has performed, or rather, does perform, very often. If you deal with cryptocurrencies in any way, shape, or form, you&rsquo;ve definitely &ldquo;transacted&rdquo; before.</p>\n<p>That being said, while the term might seem very self-explanatory, I wouldn&rsquo;t be writing a dedicated section on the topic, now would I? <strong>A &ldquo;transaction&rdquo; is actually a very broad term</strong>, as far as crypto is concerned - that&rsquo;s why it&rsquo;s important to understand it, from all sides of the deal.</p>\n<p>In this section, we&rsquo;re going to cover what is a transaction. To be a bit more specific, I&rsquo;ll tell you about the most common types of transactions, as well as cover the broader meaning behind the term, as far as cryptocurrencies and blockchain tech are concerned.</p>\n<p><em>Now, let&rsquo;s get to it!</em></p>\n<h2>What is a Transaction?</h2>\n<p>So, let&rsquo;s start off from the very beginning, and answer the most obvious question - <strong>what is a transaction?</strong></p>\n<p>Well, there are multiple examples that could be used to illustrate transactions - allow me to give two, though.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Blockchain transaction: What is a transaction?\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_blockchain_transaction_01.o.jpg/" alt=\"Blockchain transaction: What is a transaction?\" width=\"1000\" height=\"803\" /></p>\n<p>First, imagine that you and your friend decided to trade two items - you&rsquo;ll give your friend a chocolate bar for his banana. Once you trade the two items, both of you just participated in a transaction!</p>\n<p>Another example would be you buying milk and bread at the shop. You purchase these groceries for money - USD, EUR, or any other currency that&rsquo;s present in your country. Once you walk away from the cashier, once again, you&rsquo;ve just participated in a transaction - you&rsquo;ve traded your money for physical goods!</p>\n<p>Now, these examples are very, well&hellip; Obvious! However, what is a blockchain transaction in crypto?</p>\n<p><strong>Well, whenever you send or receive cryptocurrency, this is called a transaction.</strong> Even if, say, you receive crypto, and don&rsquo;t send or pay anything for it <em>(in other words, you don&rsquo;t perform a trade)</em>, this is still considered a transaction, nonetheless.</p>\n<p>Once again, up to this point, things are pretty obvious. With that out of the way, though, let&rsquo;s get down to some of the more-interesting aspects of transactions, when it comes to crypto.</p>\n<h2>Everything is a Transaction in Crypto</h2>\n<p>Probably one of the most important things to know about blockchain-based crypto transactions is that <strong>everything you do on the blockchain can be considered (or, called) a &ldquo;transaction&rdquo;.</strong></p>\n<p>So, allow me to give you an example.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Blockchain transaction: Crypto-based game.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_blockchain_transaction_02.o.jpg/" alt=\"Blockchain transaction: Crypto-based game.\" width=\"1000\" height=\"527\" /></p>\n<p>Imagine that you&rsquo;ve just found the coolest cryptocurrency game ever - it&rsquo;s action-packed, allows you to earn passive cryptocurrency tokens as you play, and is super-fun, in general.</p>\n<p>Now, the game allows you to create a custom character of your own. As you play, you will have the opportunity to upgrade your character with high-level armor and weapons. <em>Cool stuff!</em></p>\n<p>All of these assets, though - the armor, the weapons, and all other equipable items in the game - come in the form of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-non-fungible-token-nft/">NFTs, or non-fungible tokens. If you&rsquo;re not familiar with what these are, I highly recommend you go and check a <a href=https://www.bitdegree.org/"/crypto/learn/what-are-nfts/">dedicated section on the topic</strong></a>, and then come back to this one - it&rsquo;s a whole, huge topic!</p>\n<p>So, you can earn all of that equipment simply by playing the game, or you can purchase it on the in-game marketplace, for some cryptocurrency coins or tokens. <strong>For the sake of this example, let&rsquo;s assume that you&rsquo;ve chosen to earn the NFTs</strong> - say, perhaps you&rsquo;ve gotten lucky, and received a rare piece of armor from a boss fight.</p>\n<p>Well, even though you&rsquo;ve received the armor in-game, as soon as it goes into your inventory, this will be considered a crypto transaction - specifically, the game will transfer the armor, in the form of an NFT, into your cryptocurrency wallet, so that it will be 100% provable that you&rsquo;re now the owner of the item!</p>\n<p>I know, I&rsquo;ve gotten ahead of myself there - it&rsquo;s a complex topic, when you start breaking it down! If all of that sounded like a foreign language to you, I highly advise going through the whole Crypto 101 Handbook, where you&rsquo;ll find dedicated and in-depth sections on all of the terms we&rsquo;ve just ran through!</p>\n<p>That being said, though, I do hope that the core idea is clear - <strong>in the world of crypto, a &ldquo;blockchain transaction&rdquo; is any form of interaction between an individual (or an organization) and the blockchain. </strong>Buying, selling, and sending cryptocurrencies ARE NOT the only &ldquo;transactions&rdquo; that you can perform!</p>\n<p>Now, if we were to get a bit more technical and specific, I&rsquo;d like to say - a transaction happens anytime that you interact with a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-smart-contract/">smart contract</strong></a>. Smart contracts are special, automated agreements that are based on the blockchain - they allow users to trust blockchain-powered projects, since everything happens automatically, without the intervention of a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-intermediary-middleman/">middleman (or, simply - a human).</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Blockchain transaction: Everything is a transaction in crypto.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_blockchain_transaction_03.o.jpg/" alt=\"Blockchain transaction: Everything is a transaction in crypto.\" width=\"1000\" height=\"526\" /></p>\n<p>To make it even clearer, allow me to give you another example.</p>\n<p>Imagine that you&rsquo;ve come across a gambling application - one that&rsquo;s based on the blockchain, and is powered by smart contracts. Meaning, you are able to check how the rules are enforced for each game on the platform, and whether or not everything is provably fair.</p>\n<p>As you gamble your cryptocurrency on the application, each time you place a bet, or the winnings are paid out to you, a transaction occurs - either you send funds from your cryptocurrency wallet to the platform, or the smart contract pays out your winnings into your wallet, automatically.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Blockchain transaction: Bet transaction.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_blockchain_transaction_04.o.jpg/" alt=\"Blockchain transaction: Bet transaction.\" width=\"1000\" height=\"257\" /></p>\n<p>So, the core takeaway is simple - <strong>every single action that you perform on the blockchain is considered a transaction.</strong> That being said, though, why is it even important, in the first place?</p>\n<h2>The Public Nature of Transactions on the Blockchain</h2>\n<p>You see, one of the main wonders of blockchain technology is that all of the events happening on the network are completely public, and available for anyone to see. Of course, there are exceptions, but the general idea is still that.</p>\n<p>Naturally, you are able to remain completely anonymous while you perform these transactions - instead, what others will see are the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-transaction-id-txid/">crypto transaction ID (hash)</strong></a>, <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-public-address/">your public wallet address</strong></a>, the total amount of crypto sent, as well as the address of the receiver.</p>\n<p>Think about the example I gave earlier - the one with you trading a chocolate bar for a banana with your friend. Now, imagine that, instead of trading something, your friend asked you to lend him some <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin, for a project that he&rsquo;s working on. So, being the awesome friend that you are, you&rsquo;ve sent your friend the BTC that he asked for.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Blockchain transaction: The public nature of transactions on the blockchain.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_blockchain_transaction_05.o.jpg/" alt=\"Blockchain transaction: The public nature of transactions on the blockchain.\" width=\"1000\" height=\"284\" /></p>\n<p>The moment that the network receives your transaction information, it will become public, and everyone will be able to see that one wallet sent another wallet an X amount of BTC. However, no one will know who the wallets belong to, since there&rsquo;s absolutely no identifying information that would give your identity away.</p>\n<p>Well, unless you tell everyone your public wallet address, though. If that&rsquo;s the case, your transactions might not be all that anonymous!</p>\n<p><strong>The public nature of cryptocurrency transactions is considered to be the cornerstone of blockchain technology.</strong> It enables a lot of transparency within the industry, and prevents a lot of potential scams and hacking attempts, since you can always track all of the assets, no matter how many wallets they might get transferred through!</p>\n<h2>The Importance of Understanding How Transactions Work in Crypto</h2>\n<p>The last big thing that I want to emphasize in this section is the WHY - <strong>WHY you should even know and care about how do cryptocurrency transactions work, in the first place.</strong></p>\n<p>For starters, you will be transacting with crypto, every single day. Well, at least if you plan to trade, sell, purchase, and transfer cryptocurrencies between wallets - many crypto enthusiasts do just that!</p>\n<p>Understanding how transactions work - rather, what is classified as a transaction, in crypto - is <strong>super-valuable when you&rsquo;re dealing with taxes</strong>, too. All countries have their own, specific tax laws and regulations, and in some areas, you might get taxed for every transaction that you perform!</p>\n<p>In situations like these, it&rsquo;s important to know how to track all your transactions, as well. Online, you will find a variety of different cryptocurrency tax calculators and crypto transaction trackers - you can put in your wallet address, download Excel files, create spreadsheets, and organize your transactions in a way that would be presentable to the relevant tax authorities.</p>\n<p>Understanding cryptocurrency transactions is <strong>valuable when it comes to the</strong> <strong>security of your crypto assets</strong>, too! Imagine that you&rsquo;ve sent some crypto to a stranger, in exchange for a service. Later that day, that person contacts you, and says that they haven&rsquo;t received their payment, and that you should resend it.</p>\n<p>Well, if you understand how transactions work, you can simply go and check your transaction ID on the blockchain explorer, and see that the payment was, in fact, successful - then, you can rest assured that you have proof of paying the individual!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Blockchain transaction: The proof of transaction.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_blockchain_transaction_06-62cd4c9d3ad69.o.jpg/" alt=\"Blockchain transaction: The proof of transaction.\" width=\"1000\" height=\"499\" /></p>\n<p>Lastly, understanding blockchain transactions will allow you to start looking for cryptos with no transaction fees, or fastest crypto transaction speeds, depending on your own preferences. These are some advanced topics, but once you understand blockchain transactions, they will start becoming clearer to you, too!</p>\n<p>I can go on and on with the examples, but the underlying sentiment remains the same - understanding cryptocurrency transactions is one of the first steps that everyone should take when starting out and learning about crypto.</p>\n<h2>Wrapping Up</h2>\n<p>In this section, we&rsquo;ve only scratched the surface of what are cryptocurrency transactions, and how do they work. You can go much deeper, studying what happens on the blockchain when someone performs a transaction, or what to do when a transaction is stuck, but these are topics that deserve their own sections!</p>","meta_title":"What is a Blockchain Transaction and How Does It Work?","meta_description":"Trying to figure out what is a blockchain transaction? How does it function? What benefits does it offer? Find all the answers right here.","meta_keywords":"blockchain transaction, block chain transaction, what is a transaction, what is a pending transaction, crypto transaction fees, crypto transaction tracker, crypto transaction, lowest crypto transaction fees, crypto transaction id hash, which crypto has lowest transaction fees, track crypto transaction, fastest crypto transaction speed, crypto with no transaction fee","order":3,"language":"en","created_at":"2022-07-12T08:33:11.000000Z","updated_at":"2023-05-04T10:25:24.000000Z","modified_content":"<p>In this section, I&rsquo;m going to tell you what is a <strong>blockchain transaction</strong>, in crypto!</p>\n<p><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-blockchain/">Blockchain transactions are something that every single cryptocurrency holder has performed, or rather, does perform, very often. If you deal with cryptocurrencies in any way, shape, or form, you&rsquo;ve definitely &ldquo;transacted&rdquo; before.</p>\n<p>That being said, while the term might seem very self-explanatory, I wouldn&rsquo;t be writing a dedicated section on the topic, now would I? <strong>A &ldquo;transaction&rdquo; is actually a very broad term</strong>, as far as crypto is concerned - that&rsquo;s why it&rsquo;s important to understand it, from all sides of the deal.</p>\n<p>In this section, we&rsquo;re going to cover what is a transaction. To be a bit more specific, I&rsquo;ll tell you about the most common types of transactions, as well as cover the broader meaning behind the term, as far as cryptocurrencies and blockchain tech are concerned.</p>\n<p><em>Now, let&rsquo;s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"Blockchain Transaction Easily Explained! (Animated)\"\n title=\"Blockchain Transaction Easily Explained! (Animated)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: What is a Blockchain Transaction in Crypto?</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"What is a Blockchain Transaction in Crypto?\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"h1zkHIBFiS4\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">Blockchain Transaction Easily Explained! (Animated)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/h1zkHIBFiS4/hq720.jpg/"/n alt=\"Blockchain Transaction Easily Explained! (Animated)\"\n title=\"Blockchain Transaction Easily Explained! (Animated)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"Blockchain Transaction Easily Explained! (Animated)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"h1zkHIBFiS4\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>What is a Transaction?</h2>\n<p>So, let&rsquo;s start off from the very beginning, and answer the most obvious question - <strong>what is a transaction?</strong></p>\n<p>Well, there are multiple examples that could be used to illustrate transactions - allow me to give two, though.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Blockchain transaction: What is a transaction?\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_blockchain_transaction_01.o.jpg/" alt=\"Blockchain transaction: What is a transaction?\" width=\"1000\" height=\"803\" /></p>\n<p>First, imagine that you and your friend decided to trade two items - you&rsquo;ll give your friend a chocolate bar for his banana. Once you trade the two items, both of you just participated in a transaction!</p>\n<p>Another example would be you buying milk and bread at the shop. You purchase these groceries for money - USD, EUR, or any other currency that&rsquo;s present in your country. Once you walk away from the cashier, once again, you&rsquo;ve just participated in a transaction - you&rsquo;ve traded your money for physical goods!</p>\n<p>Now, these examples are very, well&hellip; Obvious! However, what is a blockchain transaction in crypto?</p>\n<p><strong>Well, whenever you send or receive cryptocurrency, this is called a transaction.</strong> Even if, say, you receive crypto, and don&rsquo;t send or pay anything for it <em>(in other words, you don&rsquo;t perform a trade)</em>, this is still considered a transaction, nonetheless.</p>\n<p>Once again, up to this point, things are pretty obvious. With that out of the way, though, let&rsquo;s get down to some of the more-interesting aspects of transactions, when it comes to crypto.</p>\n<h2>Everything is a Transaction in Crypto</h2>\n<p>Probably one of the most important things to know about blockchain-based crypto transactions is that <strong>everything you do on the blockchain can be considered (or, called) a &ldquo;transaction&rdquo;.</strong></p>\n<p>So, allow me to give you an example.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Blockchain transaction: Crypto-based game.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_blockchain_transaction_02.o.jpg/" alt=\"Blockchain transaction: Crypto-based game.\" width=\"1000\" height=\"527\" /></p>\n<p>Imagine that you&rsquo;ve just found the coolest cryptocurrency game ever - it&rsquo;s action-packed, allows you to earn passive cryptocurrency tokens as you play, and is super-fun, in general.</p>\n<p>Now, the game allows you to create a custom character of your own. As you play, you will have the opportunity to upgrade your character with high-level armor and weapons. <em>Cool stuff!</em></p>\n<p>All of these assets, though - the armor, the weapons, and all other equipable items in the game - come in the form of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-non-fungible-token-nft/">NFTs, or non-fungible tokens. If you&rsquo;re not familiar with what these are, I highly recommend you go and check a <a href=https://www.bitdegree.org/"/crypto/learn/what-are-nfts/">dedicated section on the topic</strong></a>, and then come back to this one - it&rsquo;s a whole, huge topic!</p>\n<p>So, you can earn all of that equipment simply by playing the game, or you can purchase it on the in-game marketplace, for some cryptocurrency coins or tokens. <strong>For the sake of this example, let&rsquo;s assume that you&rsquo;ve chosen to earn the NFTs</strong> - say, perhaps you&rsquo;ve gotten lucky, and received a rare piece of armor from a boss fight.</p>\n<p>Well, even though you&rsquo;ve received the armor in-game, as soon as it goes into your inventory, this will be considered a crypto transaction - specifically, the game will transfer the armor, in the form of an NFT, into your cryptocurrency wallet, so that it will be 100% provable that you&rsquo;re now the owner of the item!</p>\n<p>I know, I&rsquo;ve gotten ahead of myself there - it&rsquo;s a complex topic, when you start breaking it down! If all of that sounded like a foreign language to you, I highly advise going through the whole Crypto 101 Handbook, where you&rsquo;ll find dedicated and in-depth sections on all of the terms we&rsquo;ve just ran through!</p>\n<p>That being said, though, I do hope that the core idea is clear - <strong>in the world of crypto, a &ldquo;blockchain transaction&rdquo; is any form of interaction between an individual (or an organization) and the blockchain. </strong>Buying, selling, and sending cryptocurrencies ARE NOT the only &ldquo;transactions&rdquo; that you can perform!</p>\n<p>Now, if we were to get a bit more technical and specific, I&rsquo;d like to say - a transaction happens anytime that you interact with a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-smart-contract/">smart contract</strong></a>. Smart contracts are special, automated agreements that are based on the blockchain - they allow users to trust blockchain-powered projects, since everything happens automatically, without the intervention of a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-intermediary-middleman/">middleman (or, simply - a human).</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Blockchain transaction: Everything is a transaction in crypto.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_blockchain_transaction_03.o.jpg/" alt=\"Blockchain transaction: Everything is a transaction in crypto.\" width=\"1000\" height=\"526\" /></p>\n<p>To make it even clearer, allow me to give you another example.</p>\n<p>Imagine that you&rsquo;ve come across a gambling application - one that&rsquo;s based on the blockchain, and is powered by smart contracts. Meaning, you are able to check how the rules are enforced for each game on the platform, and whether or not everything is provably fair.</p>\n<p>As you gamble your cryptocurrency on the application, each time you place a bet, or the winnings are paid out to you, a transaction occurs - either you send funds from your cryptocurrency wallet to the platform, or the smart contract pays out your winnings into your wallet, automatically.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Blockchain transaction: Bet transaction.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_blockchain_transaction_04.o.jpg/" alt=\"Blockchain transaction: Bet transaction.\" width=\"1000\" height=\"257\" /></p>\n<p>So, the core takeaway is simple - <strong>every single action that you perform on the blockchain is considered a transaction.</strong> That being said, though, why is it even important, in the first place?</p>\n<h2>The Public Nature of Transactions on the Blockchain</h2>\n<p>You see, one of the main wonders of blockchain technology is that all of the events happening on the network are completely public, and available for anyone to see. Of course, there are exceptions, but the general idea is still that.</p>\n<p>Naturally, you are able to remain completely anonymous while you perform these transactions - instead, what others will see are the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-transaction-id-txid/">crypto transaction ID (hash)</strong></a>, <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-public-address/">your public wallet address</strong></a>, the total amount of crypto sent, as well as the address of the receiver.</p>\n<p>Think about the example I gave earlier - the one with you trading a chocolate bar for a banana with your friend. Now, imagine that, instead of trading something, your friend asked you to lend him some <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin, for a project that he&rsquo;s working on. So, being the awesome friend that you are, you&rsquo;ve sent your friend the BTC that he asked for.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Blockchain transaction: The public nature of transactions on the blockchain.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_blockchain_transaction_05.o.jpg/" alt=\"Blockchain transaction: The public nature of transactions on the blockchain.\" width=\"1000\" height=\"284\" /></p>\n<p>The moment that the network receives your transaction information, it will become public, and everyone will be able to see that one wallet sent another wallet an X amount of BTC. However, no one will know who the wallets belong to, since there&rsquo;s absolutely no identifying information that would give your identity away.</p>\n<p>Well, unless you tell everyone your public wallet address, though. If that&rsquo;s the case, your transactions might not be all that anonymous!</p>\n<p><strong>The public nature of cryptocurrency transactions is considered to be the cornerstone of blockchain technology.</strong> It enables a lot of transparency within the industry, and prevents a lot of potential scams and hacking attempts, since you can always track all of the assets, no matter how many wallets they might get transferred through!</p>\n<h2>The Importance of Understanding How Transactions Work in Crypto</h2>\n<p>The last big thing that I want to emphasize in this section is the WHY - <strong>WHY you should even know and care about how do cryptocurrency transactions work, in the first place.</strong></p>\n<p>For starters, you will be transacting with crypto, every single day. Well, at least if you plan to trade, sell, purchase, and transfer cryptocurrencies between wallets - many crypto enthusiasts do just that!</p>\n<p>Understanding how transactions work - rather, what is classified as a transaction, in crypto - is <strong>super-valuable when you&rsquo;re dealing with taxes</strong>, too. All countries have their own, specific tax laws and regulations, and in some areas, you might get taxed for every transaction that you perform!</p>\n<p>In situations like these, it&rsquo;s important to know how to track all your transactions, as well. Online, you will find a variety of different cryptocurrency tax calculators and crypto transaction trackers - you can put in your wallet address, download Excel files, create spreadsheets, and organize your transactions in a way that would be presentable to the relevant tax authorities.</p>\n<p>Understanding cryptocurrency transactions is <strong>valuable when it comes to the</strong> <strong>security of your crypto assets</strong>, too! Imagine that you&rsquo;ve sent some crypto to a stranger, in exchange for a service. Later that day, that person contacts you, and says that they haven&rsquo;t received their payment, and that you should resend it.</p>\n<p>Well, if you understand how transactions work, you can simply go and check your transaction ID on the blockchain explorer, and see that the payment was, in fact, successful - then, you can rest assured that you have proof of paying the individual!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Blockchain transaction: The proof of transaction.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_blockchain_transaction_06-62cd4c9d3ad69.o.jpg/" alt=\"Blockchain transaction: The proof of transaction.\" width=\"1000\" height=\"499\" /></p>\n<p>Lastly, understanding blockchain transactions will allow you to start looking for cryptos with no transaction fees, or fastest crypto transaction speeds, depending on your own preferences. These are some advanced topics, but once you understand blockchain transactions, they will start becoming clearer to you, too!</p>\n<p>I can go on and on with the examples, but the underlying sentiment remains the same - understanding cryptocurrency transactions is one of the first steps that everyone should take when starting out and learning about crypto.</p>\n<h2>Wrapping Up</h2>\n<p>In this section, we&rsquo;ve only scratched the surface of what are cryptocurrency transactions, and how do they work. You can go much deeper, studying what happens on the blockchain when someone performs a transaction, or what to do when a transaction is stuck, but these are topics that deserve their own sections!</p>","preview_url":"https://www.bitdegree.org/crypto/learn/blockchain-transaction","youtube_video":{"id":90,"channel_id":1,"sort":32,"video_title":"Blockchain Transaction Easily Explained! (Animated)","description":"Blockchain Transaction Easily Explained! (Animated)\nWhat is a blockchain transaction in crypto?\n\nBlockchain transactions are something that every cryptocurrency holder has participated in, at least once - whether it be buying or selling crypto, trading with your friends, or transferring your cryptocurrency assets from one wallet to another. \n\nThat said, the question “what is a transaction” can hold multiple meanings, in the cryptocurrency and blockchain world! In this video, you will learn about all of those main meanings, and find out why it’s important to understand this term, in the first place!\n\nWhat are the most common types of blockchain transactions that you perform? Share your experiences in the comments down below!\n\nVideo Time Table:\n\n0:00 Introduction to What is a Blockchain Transaction\n0:58 What is a Transaction?\n4:45 The Nature of Blockchain Transactions\n6:14 The Importance of Understanding Blockchain Transactions\n7:59 Wrap-up: What is a Blockchain Transaction?\n\nMore Related Videos:\n? What is Blockchain? https://www.youtube.com/watch?v=O2-XxMo5PFs\n? What is an NFT? https://www.youtube.com/watch?v=YL0-sEzDDNI\n? What is a Smart Contract? https://www.youtube.com/watch?v=0VCMtKx9AxU\n? How to Avoid Crypto Taxes? https://www.youtube.com/watch?v=ERzU_Xz_P-o\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#BlockchainTransaction #WhatisaTransaction #CryptoTransactionFees","video_id":"h1zkHIBFiS4","duration":502,"view_count":649,"thumbnail_url":"https://i.ytimg.com/vi/h1zkHIBFiS4/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-07-15 17:36:41","created_at":"2022-07-15T23:00:02.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}}},"prevSection":{"id":4,"featured_image_id":6412,"original_id":null,"youtube_video_id":6,"author_id":42,"translator_id":null,"chapter_id":1,"title":"What is the Blockchain?","slug":"what-is-blockchain","definition":"Did you know that about 90% of US and European banks have begun to research blockchain's potential?","status":"published","content":"<p>You&rsquo;ve probably seen those flashy headlines that blockchain technology is considered by many to be a revolutionary innovation, and one that can change the world in many different ways, that blockchain is the FUTURE, and so on and so forth. Even though it receives extensive mainstream news hype seemingly every single day, most people still aren&rsquo;t completely sure what blockchains are, and how they actually could use them.</p>\n<p>In this section, I&rsquo;ll be explaining to you - what is a blockchain, how blockchains work, how are they different from traditional technology, and how YOU could use them, too.</p>\n<p><em>Ready? Let&rsquo;s get to it!</em></p>\n<h2>What is a Blockchain?</h2>\n<p>The term actually consists of two words - a &ldquo;<strong>block</strong>&rdquo;, and a &ldquo;<strong>chain</strong>&rdquo;. A &ldquo;<strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-block/">block&rdquo; is a place where we store data and various types of information. In the same manner, as you would store your butter and milk in a fridge to keep them cool, data is stored in blocks in order to keep it safe, structured, and easily accessible.&nbsp;</p>\n<p>What about a &ldquo;chain&rdquo;? Each block has information about the block previous to it, and this forms the connection, or a &ldquo;chain&rdquo;, between each block standing nearby, like in a physical chain.</p>\n<p>Now, what sort of information is stored in these blocks? Well, while you can store different types of data in these virtual chests, blocks usually hold just simple strings of textual data - we call them &ldquo;<strong>transactional records</strong>&rdquo;.</p>\n<p>Why &ldquo;transactional&rdquo; records? Simply because <strong><a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin, the most popular <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-cryptocurrency/">cryptocurrency that you&rsquo;ve probably already heard about, was one of the highly adopted uses of blockchain in the masses, and it turned out to become a substitute for the daily currencies we&rsquo;re used to live with.&nbsp;</p>\n<p>So, Bitcoin is a currency. And every trade of a currency should have an action, and normally, in your daily life, you call it a &ldquo;transaction&rdquo;.</p>\n<p>Obviously, the same way we have it in the real world, on the blockchain they&rsquo;re called the same as when trading Bitcoin - transactions! Thus, all records of actions on the blockchain are called transactions, even if those actions are not related to any sort of cryptocurrencies or digital money anymore.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-1.o.jpg/" alt=\"What is blockchain: blockchain transactions.\" width=\"1000\" height=\"900\" /></p>\n<p>For example, it can be just a <strong>textual log record</strong> of something that we want to store on a blockchain, let&rsquo;s say, your name or a phone number, and yes, we <strong>still call it a transaction record</strong>, because of the historic matter I just told you about.</p>\n<p><em>Sounds cool, but what does that look like? </em>Well, a typical transaction on a blockchain would look a little something like this:</p>\n<p>&ldquo;Sam paid Joe $20&rdquo;</p>\n<p><em>Simple enough, right? </em>Well, a single block can store <strong>hundreds or even thousands of transactions</strong>! The capacity depends on the individual blockchains, but newer ones can usually store many more transactions than their older iterations.</p>\n<p>So where is the &ldquo;chain&rdquo; part here? As I explained to you before, the &ldquo;chain&rdquo; refers to the fact that all blocks of information are <strong>connected with each other</strong>, chronologically.</p>\n<p>&nbsp;A very simple way to look at it would be like this:</p>\n<p>Imagine that, in our earlier example, Sam paid Joe $20 last Friday. In the next few days, Joe paid Elly $50, and Elly paid Tom $10. All of these transactions happened in that order, and thus, it&rsquo;s important for them to be tracked in that order, as well! Blocks of information can contain the data, but them being connected by virtual chains helps to track when each transaction happened, and how they are all connected, too.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-2.o.jpg/" alt=\"What is blockchain: Examples of transactions on blockchain.\" width=\"1000\" height=\"600\" /></p>\n<p>Now, I can hear you asking - <em>why can&rsquo;t we just create a single block, and store all of the information on it? </em>Well, for the same reason we can&rsquo;t take a single bus to drive all of the people from one city to another - it doesn&rsquo;t have enough space and speed to drive them all at once!</p>\n<p>Blocks are very <strong>limited</strong> in how many transactions they can hold. On top of that, multiple blocks allow for transactions to be registered on them much faster&nbsp;since they don&rsquo;t have to be packed in one, single digital area.</p>\n<p>Think about it - you go to the shop for groceries, gather everything you need, and start making your way towards the checkout. It&rsquo;s a busy day - there are a lot of other shoppers trying to checkout, as well. Now, imagine that there was a Black Friday or a Christmas sale happening - millions of people came to participate and grab discounts offered by this small business.</p>\n<p>This would result in you likely spending hours or even days in the shop, just trying to make your way through all of the people! Now, if there were multiple shops like that, and people would have to wait in a queue to enter, this would be much more orderly.</p>\n<p>So, to recap, a blockchain is simply <strong>a</strong> <strong>place where data</strong> <strong>(or information) is stored</strong> in a very effective manner. This information could refer to many different things, but for the sake of keeping the learning curve simple, let&rsquo;s just say that the main type of data stored on blockchains is transaction records.</p>\n<h2>How Does a Blockchain Work?</h2>\n<p>Well, the first thing that you need to know here is that, in order for blockchains to store data, this data needs to be <strong>inputted into the blocks</strong>. In other words, this requires work to be done! If you want to get to the shop that&rsquo;s a few miles away, you could either go on foot, drive your car there, or catch a bus - simply put, there are a few different ways you could get there.</p>\n<p>Applying that same logic to our topic at hand, there are a few different methods of how work can be performed on the blockchain, in order for it to store data. The two major methods are called &ldquo;<strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-work-pow/">Proof-of-Work&rdquo; and &ldquo;<strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake&rdquo; - I&rsquo;ll keep it simple today, and only talk about these two.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-3.o.jpg/" alt=\"What is blockchain: How do blockchains work?\" width=\"1000\" height=\"350\" /></p>\n<p>So, the most popular method is called &ldquo;Proof-of-Work&rdquo;!&nbsp;Normally, once transactions are agreed upon between the users, they need to be approved, before they are saved to a block in the chain.</p>\n<p>So, besides you and the public blockchain itself, we involve an extra element - <strong>The Miner</strong> - a computer, or actually, a mass of computers called <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-node/">nodes, that work to solve complex mathematical queries to confirm those aforementioned transactions, and, let&rsquo;s say, - to save your records in a blockchain. Those nodes are decision-makers, a <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-consensus/">consensus who check and agree to store your transaction.</p>\n<p>Now, let&rsquo;s not get too technical - instead, allow me to go back to simple examples!</p>\n<p>In the real world, miners mine rocks in order to find precious ores, such as iron and gold. Mining is their work, and the reward is the product that they mine. To be completely frank with you, the same process happens with <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-mining/">mining on the blockchain, as well!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-4.o.jpg/" alt=\"What is blockchain: Proof of Work consensus mechanism.\" width=\"1000\" height=\"550\" /></p>\n<p>Because it&rsquo;s a virtual transaction, instead of a person mining, you have a computer doing the job. Instead of precious ores, these computer machines get rewards in cryptocurrency that they mine. They do the work for others - confirm the transactions happening on the network - and get rewarded for doing so.</p>\n<p>Before we continue, I can imagine that you&rsquo;re wondering - <em>who are these miners that confirm transactions on the blockchain?</em></p>\n<p>Well, in order to answer that question, you first need to know what &ldquo;<strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-decentralization/">decentralization&rdquo; is.</p>\n<h2>Decentralization in Crypto</h2>\n<p>Most blockchains are decentralized. This simply means that they <strong>do not belong to a single authority</strong> - no company, CEO, or director owns the blockchain. In other words, there is no single, central figure governing it!</p>\n<p><em>So&hellip; Who&rsquo;s responsible for how the blockchain functions, then?</em></p>\n<p>If you said &ldquo;miners&rdquo;, you are very correct!</p>\n<p>To answer the original question - anyone can be a miner on the blockchain! In many cases, all that you need to do is connect your computer to the network, and dedicate its resources to the process of mining. This way, many people from all over the world can become miners, help manage the blockchain and confirm the transactions happening within.</p>\n<p>Doing so, these miners will be rewarded with the cryptocurrency of the blockchain they mine - so, if you were to mine <strong><a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin, you would receive BTC rewards!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-5.o.jpg/" alt=\"What is blockchain: Decentralization in crypto.\" width=\"1000\" height=\"450\" /></p>\n<p>On the topic of how blockchains work, there is one thing that needs to be discussed - foul play, and how blockchains avoid it.</p>\n<p>The essential question here is simple - how can blockchains make sure that none of the miners are malicious scammers, and that they won&rsquo;t simply input a false transaction and run away with peoples&rsquo; funds?</p>\n<p>Now, the question is simple, but it&rsquo;s not that easy to answer without getting a bit technical. However, I won&rsquo;t bore you with all of the technical detail and will just give you enough information so that you could understand the general premise around it.</p>\n<p>All transactions happening on the blockchain are <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-encryption/">encrypted. This means that, say, when Sam pays Elly $73, this payment is anonymous on the blockchain, and is displayed in a sequence of numbers and letters.</p>\n<p>Following that, remember the &ldquo;chain&rdquo; part in &ldquo;blockchain&rdquo;? And how it helps to keep the information (or transaction data) chronological? Well, in essence, due to the encryption and security features behind blockchains, <strong>all past-confirmed transactions cannot be changed.</strong></p>\n<p><strong><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-6-6270bbaec55f3.o.jpg/" alt=\"What is blockchain: Why blockchains are scam-proof?\" width=\"1000\" height=\"400\" /></strong></p>\n<p>Imagine that you&rsquo;re about to present a poem in front of a class of students. The teacher will grade you for the way that you present that poem. Let&rsquo;s say, you were quite successful with your presentation, and received a B - the teacher announced your grade to the entire class of students.</p>\n<p>Now, if you or any other student would then go and claim that you&rsquo;ve actually received an A+, no one would believe you - this is because there was an entire class of students who heard your actual grade announced! On a very fundamental level, this is how blockchains ensure that the transactions happening on them are truthful and legitimate.</p>\n<p>Instead of a poem, you perform <strong>a</strong> <strong>transaction</strong> - send or receive digital money, in the form of cryptocurrency. Instead of a grade, you receive <strong>the data (confirmation) of your transaction. </strong>And instead of the class of students hearing your grade announced, there are <strong>miners</strong> who confirm the transaction.</p>\n<p><em>Very cool, indeed!</em></p>\n<p>So, then - up to this point, we&rsquo;ve figured out that blockchains are virtual chests that store transaction data, and that they are able to encrypt these transactions so that no one could access and tamper with them. We&rsquo;ve also covered the topics of decentralization and miners, too!</p>\n<h2>How Can You Use Blockchains in Your Life?</h2>\n<p>Currently, the most common way of how an average person uses blockchain technology is by purchasing and transacting with crypto. If you buy Bitcoin, and then send it to your friends, you ARE using blockchain tech to do so, whether you know it or not!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-7.o.jpg/" alt=\"What is blockchain: How can you use blockchains?\" width=\"1000\" height=\"550\" /></p>\n<p>It is expected that, with time, blockchains will become more and more integrated into our daily lives. Traditional payment methods will be performed with the help of blockchain technology, loans will be given out on blockchains, and other financial operations will involve them, too.</p>\n<p>Furthermore, blockchain technology is what powers concepts such as Web 3.0 and the Metaverse. I won&rsquo;t go into detail on these topics here, since we&rsquo;ve covered a lot already - if you&rsquo;re interested to learn more, you can check the sections \"<strong><a href=https://www.bitdegree.org/"/crypto/learn/what-is-web-3-0/">What is Web 3.0?</a></strong>\" and \"<strong><a href=https://www.bitdegree.org/"/crypto/learn/what-is-the-metaverse/">What is the Metaverse?</a></strong>\".</p>","meta_title":"What is the Blockchain: How It Works and Why is It Useful?","meta_description":"Wondering what is the blockchain technology you've been hearing about everywhere? Find all the answers considering this topic right here.","meta_keywords":"what is blockchain, what is blockchain technology, what is blockchain technology and how does it work, what is blockchain for dummies, how many blockchains are there, what is blockchain mining, where is the blockchain stored","order":1,"language":"en","created_at":"2022-05-02T08:33:36.000000Z","updated_at":"2023-05-04T10:25:24.000000Z","modified_content":"<p>You&rsquo;ve probably seen those flashy headlines that blockchain technology is considered by many to be a revolutionary innovation, and one that can change the world in many different ways, that blockchain is the FUTURE, and so on and so forth. Even though it receives extensive mainstream news hype seemingly every single day, most people still aren&rsquo;t completely sure what blockchains are, and how they actually could use them.</p>\n<p>In this section, I&rsquo;ll be explaining to you - what is a blockchain, how blockchains work, how are they different from traditional technology, and how YOU could use them, too.</p>\n<p><em>Ready? Let&rsquo;s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"What is Blockchain? (Animated Examples + Explanation)\"\n title=\"What is Blockchain? (Animated Examples + Explanation)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: What is the Blockchain?</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"What is the Blockchain?\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"O2-XxMo5PFs\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">What is Blockchain? (Animated Examples + Explanation)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/O2-XxMo5PFs/hq720.jpg/"/n alt=\"What is Blockchain? (Animated Examples + Explanation)\"\n title=\"What is Blockchain? (Animated Examples + Explanation)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"What is Blockchain? (Animated Examples + Explanation)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"O2-XxMo5PFs\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>What is a Blockchain?</h2>\n<p>The term actually consists of two words - a &ldquo;<strong>block</strong>&rdquo;, and a &ldquo;<strong>chain</strong>&rdquo;. A &ldquo;<strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-block/">block&rdquo; is a place where we store data and various types of information. In the same manner, as you would store your butter and milk in a fridge to keep them cool, data is stored in blocks in order to keep it safe, structured, and easily accessible.&nbsp;</p>\n<p>What about a &ldquo;chain&rdquo;? Each block has information about the block previous to it, and this forms the connection, or a &ldquo;chain&rdquo;, between each block standing nearby, like in a physical chain.</p>\n<p>Now, what sort of information is stored in these blocks? Well, while you can store different types of data in these virtual chests, blocks usually hold just simple strings of textual data - we call them &ldquo;<strong>transactional records</strong>&rdquo;.</p>\n<p>Why &ldquo;transactional&rdquo; records? Simply because <strong><a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin, the most popular <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-cryptocurrency/">cryptocurrency that you&rsquo;ve probably already heard about, was one of the highly adopted uses of blockchain in the masses, and it turned out to become a substitute for the daily currencies we&rsquo;re used to live with.&nbsp;</p>\n<p>So, Bitcoin is a currency. And every trade of a currency should have an action, and normally, in your daily life, you call it a &ldquo;transaction&rdquo;.</p>\n<p>Obviously, the same way we have it in the real world, on the blockchain they&rsquo;re called the same as when trading Bitcoin - transactions! Thus, all records of actions on the blockchain are called transactions, even if those actions are not related to any sort of cryptocurrencies or digital money anymore.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-1.o.jpg/" alt=\"What is blockchain: blockchain transactions.\" width=\"1000\" height=\"900\" /></p>\n<p>For example, it can be just a <strong>textual log record</strong> of something that we want to store on a blockchain, let&rsquo;s say, your name or a phone number, and yes, we <strong>still call it a transaction record</strong>, because of the historic matter I just told you about.</p>\n<p><em>Sounds cool, but what does that look like? </em>Well, a typical transaction on a blockchain would look a little something like this:</p>\n<p>&ldquo;Sam paid Joe $20&rdquo;</p>\n<p><em>Simple enough, right? </em>Well, a single block can store <strong>hundreds or even thousands of transactions</strong>! The capacity depends on the individual blockchains, but newer ones can usually store many more transactions than their older iterations.</p>\n<p>So where is the &ldquo;chain&rdquo; part here? As I explained to you before, the &ldquo;chain&rdquo; refers to the fact that all blocks of information are <strong>connected with each other</strong>, chronologically.</p>\n<p>&nbsp;A very simple way to look at it would be like this:</p>\n<p>Imagine that, in our earlier example, Sam paid Joe $20 last Friday. In the next few days, Joe paid Elly $50, and Elly paid Tom $10. All of these transactions happened in that order, and thus, it&rsquo;s important for them to be tracked in that order, as well! Blocks of information can contain the data, but them being connected by virtual chains helps to track when each transaction happened, and how they are all connected, too.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-2.o.jpg/" alt=\"What is blockchain: Examples of transactions on blockchain.\" width=\"1000\" height=\"600\" /></p>\n<p>Now, I can hear you asking - <em>why can&rsquo;t we just create a single block, and store all of the information on it? </em>Well, for the same reason we can&rsquo;t take a single bus to drive all of the people from one city to another - it doesn&rsquo;t have enough space and speed to drive them all at once!</p>\n<p>Blocks are very <strong>limited</strong> in how many transactions they can hold. On top of that, multiple blocks allow for transactions to be registered on them much faster&nbsp;since they don&rsquo;t have to be packed in one, single digital area.</p>\n<p>Think about it - you go to the shop for groceries, gather everything you need, and start making your way towards the checkout. It&rsquo;s a busy day - there are a lot of other shoppers trying to checkout, as well. Now, imagine that there was a Black Friday or a Christmas sale happening - millions of people came to participate and grab discounts offered by this small business.</p>\n<p>This would result in you likely spending hours or even days in the shop, just trying to make your way through all of the people! Now, if there were multiple shops like that, and people would have to wait in a queue to enter, this would be much more orderly.</p>\n<p>So, to recap, a blockchain is simply <strong>a</strong> <strong>place where data</strong> <strong>(or information) is stored</strong> in a very effective manner. This information could refer to many different things, but for the sake of keeping the learning curve simple, let&rsquo;s just say that the main type of data stored on blockchains is transaction records.</p>\n<h2>How Does a Blockchain Work?</h2>\n<p>Well, the first thing that you need to know here is that, in order for blockchains to store data, this data needs to be <strong>inputted into the blocks</strong>. In other words, this requires work to be done! If you want to get to the shop that&rsquo;s a few miles away, you could either go on foot, drive your car there, or catch a bus - simply put, there are a few different ways you could get there.</p>\n<p>Applying that same logic to our topic at hand, there are a few different methods of how work can be performed on the blockchain, in order for it to store data. The two major methods are called &ldquo;<strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-work-pow/">Proof-of-Work&rdquo; and &ldquo;<strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake&rdquo; - I&rsquo;ll keep it simple today, and only talk about these two.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-3.o.jpg/" alt=\"What is blockchain: How do blockchains work?\" width=\"1000\" height=\"350\" /></p>\n<p>So, the most popular method is called &ldquo;Proof-of-Work&rdquo;!&nbsp;Normally, once transactions are agreed upon between the users, they need to be approved, before they are saved to a block in the chain.</p>\n<p>So, besides you and the public blockchain itself, we involve an extra element - <strong>The Miner</strong> - a computer, or actually, a mass of computers called <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-node/">nodes, that work to solve complex mathematical queries to confirm those aforementioned transactions, and, let&rsquo;s say, - to save your records in a blockchain. Those nodes are decision-makers, a <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-consensus/">consensus who check and agree to store your transaction.</p>\n<p>Now, let&rsquo;s not get too technical - instead, allow me to go back to simple examples!</p>\n<p>In the real world, miners mine rocks in order to find precious ores, such as iron and gold. Mining is their work, and the reward is the product that they mine. To be completely frank with you, the same process happens with <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-mining/">mining on the blockchain, as well!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-4.o.jpg/" alt=\"What is blockchain: Proof of Work consensus mechanism.\" width=\"1000\" height=\"550\" /></p>\n<p>Because it&rsquo;s a virtual transaction, instead of a person mining, you have a computer doing the job. Instead of precious ores, these computer machines get rewards in cryptocurrency that they mine. They do the work for others - confirm the transactions happening on the network - and get rewarded for doing so.</p>\n<p>Before we continue, I can imagine that you&rsquo;re wondering - <em>who are these miners that confirm transactions on the blockchain?</em></p>\n<p>Well, in order to answer that question, you first need to know what &ldquo;<strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-decentralization/">decentralization&rdquo; is.</p>\n<h2>Decentralization in Crypto</h2>\n<p>Most blockchains are decentralized. This simply means that they <strong>do not belong to a single authority</strong> - no company, CEO, or director owns the blockchain. In other words, there is no single, central figure governing it!</p>\n<p><em>So&hellip; Who&rsquo;s responsible for how the blockchain functions, then?</em></p>\n<p>If you said &ldquo;miners&rdquo;, you are very correct!</p>\n<p>To answer the original question - anyone can be a miner on the blockchain! In many cases, all that you need to do is connect your computer to the network, and dedicate its resources to the process of mining. This way, many people from all over the world can become miners, help manage the blockchain and confirm the transactions happening within.</p>\n<p>Doing so, these miners will be rewarded with the cryptocurrency of the blockchain they mine - so, if you were to mine <strong><a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin, you would receive BTC rewards!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-5.o.jpg/" alt=\"What is blockchain: Decentralization in crypto.\" width=\"1000\" height=\"450\" /></p>\n<p>On the topic of how blockchains work, there is one thing that needs to be discussed - foul play, and how blockchains avoid it.</p>\n<p>The essential question here is simple - how can blockchains make sure that none of the miners are malicious scammers, and that they won&rsquo;t simply input a false transaction and run away with peoples&rsquo; funds?</p>\n<p>Now, the question is simple, but it&rsquo;s not that easy to answer without getting a bit technical. However, I won&rsquo;t bore you with all of the technical detail and will just give you enough information so that you could understand the general premise around it.</p>\n<p>All transactions happening on the blockchain are <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-encryption/">encrypted. This means that, say, when Sam pays Elly $73, this payment is anonymous on the blockchain, and is displayed in a sequence of numbers and letters.</p>\n<p>Following that, remember the &ldquo;chain&rdquo; part in &ldquo;blockchain&rdquo;? And how it helps to keep the information (or transaction data) chronological? Well, in essence, due to the encryption and security features behind blockchains, <strong>all past-confirmed transactions cannot be changed.</strong></p>\n<p><strong><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-6-6270bbaec55f3.o.jpg/" alt=\"What is blockchain: Why blockchains are scam-proof?\" width=\"1000\" height=\"400\" /></strong></p>\n<p>Imagine that you&rsquo;re about to present a poem in front of a class of students. The teacher will grade you for the way that you present that poem. Let&rsquo;s say, you were quite successful with your presentation, and received a B - the teacher announced your grade to the entire class of students.</p>\n<p>Now, if you or any other student would then go and claim that you&rsquo;ve actually received an A+, no one would believe you - this is because there was an entire class of students who heard your actual grade announced! On a very fundamental level, this is how blockchains ensure that the transactions happening on them are truthful and legitimate.</p>\n<p>Instead of a poem, you perform <strong>a</strong> <strong>transaction</strong> - send or receive digital money, in the form of cryptocurrency. Instead of a grade, you receive <strong>the data (confirmation) of your transaction. </strong>And instead of the class of students hearing your grade announced, there are <strong>miners</strong> who confirm the transaction.</p>\n<p><em>Very cool, indeed!</em></p>\n<p>So, then - up to this point, we&rsquo;ve figured out that blockchains are virtual chests that store transaction data, and that they are able to encrypt these transactions so that no one could access and tamper with them. We&rsquo;ve also covered the topics of decentralization and miners, too!</p>\n<h2>How Can You Use Blockchains in Your Life?</h2>\n<p>Currently, the most common way of how an average person uses blockchain technology is by purchasing and transacting with crypto. If you buy Bitcoin, and then send it to your friends, you ARE using blockchain tech to do so, whether you know it or not!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-7.o.jpg/" alt=\"What is blockchain: How can you use blockchains?\" width=\"1000\" height=\"550\" /></p>\n<p>It is expected that, with time, blockchains will become more and more integrated into our daily lives. Traditional payment methods will be performed with the help of blockchain technology, loans will be given out on blockchains, and other financial operations will involve them, too.</p>\n<p>Furthermore, blockchain technology is what powers concepts such as Web 3.0 and the Metaverse. I won&rsquo;t go into detail on these topics here, since we&rsquo;ve covered a lot already - if you&rsquo;re interested to learn more, you can check the sections \"<strong><a href=https://www.bitdegree.org/"/crypto/learn/what-is-web-3-0/">What is Web 3.0?</a></strong>\" and \"<strong><a href=https://www.bitdegree.org/"/crypto/learn/what-is-the-metaverse/">What is the Metaverse?</a></strong>\".</p>","preview_url":"https://www.bitdegree.org/crypto/learn/what-is-blockchain","youtube_video":{"id":6,"channel_id":1,"sort":56,"video_title":"What is Blockchain? (Animated Examples + Explanation)","description":"What is Blockchain?\n\nBlockchain is a virtual database, where data about various actions and assets is stored - from payments to exchanges, and many other transactions in between. At the moment, blockchains are predicted to become an integral part of our daily lives.\n\nBecause blockchains are incredibly efficient when it comes to storing data - and a lot of it - the technology is expected to be adopted by pretty much every industry in the future. In this video, you will learn about how blockchains work, what kind of data can be stored on a blockchain, and why they are so safe when it comes to fraud - all explained with simple examples and without any technical jargon!\n\nVideo Time Table:\n\n0:00 Introduction to What is Blockchain\n0:56 What is a Blockchain?\n5:26 How do Blockchains Work?\n7:53 Decentralization in Crypto\n11:29 How Can You Use Blockchains?\n12:24 Wrap-up: What is Blockchain?\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#WhatisBlockchain #WhatisBlockchainTechnology #WhatAreBlockchains #BlockchainMeaning","video_id":"O2-XxMo5PFs","duration":758,"view_count":2151,"thumbnail_url":"https://i.ytimg.com/vi/O2-XxMo5PFs/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-02-01 19:38:36","created_at":"2022-02-21T13:20:28.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}}},"chapterTitle":"Blockchain","cryptoBookSection":{"id":27,"featured_image_id":7205,"original_id":null,"youtube_video_id":65,"author_id":42,"translator_id":null,"chapter_id":1,"title":"Anonymous & Decentralized Blockchains: The Cornerstone of Crypto","slug":"decentralized-blockchain","definition":"Did you know that Monero is frequently regarded as the most anonymous and decentralized blockchain?","status":"published","content":"<p>In this section, I&rsquo;m going to tell you about anonymous and decentralized <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-blockchain/">blockchains!

/n

The term &ldquo;decentralized blockchain&rdquo; is definitely something you&rsquo;ve encountered, if you&rsquo;ve spent even a day in the crypto space. In fact, we often get so numb to terms such as these, that we don&rsquo;t even really give them much thought!</p>\n<p>However, did you know that <strong>decentralization and anonymity</strong> are among the fundamental cornerstones of the crypto industry, as a whole? That being the case, however, these two concepts are also very controversial, especially when it comes to crypto regulations.</p>\n<p>In this section, you&rsquo;ll learn about decentralization and anonymity, as they relate to the world of crypto. More specifically, I&rsquo;ll tell you what these concepts mean, how they relate to crypto, as well as why are they important for blockchain-powered projects, in general.</p>\n<p><em>Let&rsquo;s get to it!</em></p>\n<h2>What are &ldquo;Decentralization&rdquo; and &ldquo;Anonymity&rdquo; in Crypto?</h2>\n<p>Before we can really get into the main points of this section, and analyze centralized VS decentralized blockchain technology, it&rsquo;s important to break down what concepts such as a &ldquo;decentralized blockchain&rdquo; mean, to begin with! While it may seem self-explanatory at first, it&rsquo;s like the famous meme of the iceberg - once you start looking into it, you see that there&rsquo;s a lot more than initially meets the eye.</p>\n<p>So, let&rsquo;s start with <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-decentralization/">decentralization. As the term implies, decentralization refers to something lacking a single, centralized governing authority. So, imagine that there are two shops in your town - one centralized, and the other - decentralized.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Decentralized blockchain: Centralization vs Decentralization.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/decentralization_anonimity_in_crypto_01.o.jpg/" alt=\"Decentralized blockchain: Centralization vs Decentralization.\" width=\"1000\" height=\"273\" /></p>\n<p>The centralized shop will function just like you&rsquo;d expect - there are employers and employees, everyone has their own, designated roles and responsibilities, and <strong>there&rsquo;s always some form of higher management that you need to report to.</strong></p>\n<p>With this traditional shop model, there is a set specific hierarchy within the system, and thus, there are designated parties that make the executive decisions about the direction that the shop will take - whether or not it will sell a specific chocolate bar, how many employees it will hire VS how many will be laid off, what are the salaries of each employee, and so on.</p>\n<p>Now, the decentralized shop is where things get much more interesting. <strong>In this case, there is no single, central authority</strong> - no manager, director, or CEO to oversee the processes and give orders. Instead, each employee within the shop is responsible for the well-being of the establishment - they all make the executive decisions, all have a say in the direction that the shop is going, and are all able to make a huge influence on the end results.</p>\n<p><em>Sounds awesome, but how does it work in crypto?</em> Well, I&rsquo;ll get to that - for now, I just want you to understand the general premise of decentralization, as a concept.</p>\n<p><strong>Next up is blockchain anonymity.</strong> Once again, at first glance, the term is rather self-explanatory - it&rsquo;s when you are able to do something while remaining anonymous, or, in other words, without revealing your true identity.</p>\n<p>Imagine a situation in an online game - <em>say, something like League of Legends.</em> When you play the game, you&rsquo;re able to talk to your teammates, and write messages. However, you do so without revealing your true identity, and under some sort of an alias - thus, you&rsquo;re able to remain anonymous, at least to other players!</p>\n<p>Now, evidently, this isn&rsquo;t an ideal example, since you&rsquo;re still doxed to the company behind the game, especially if you make any online purchases on their platform. But we&rsquo;ll get to that soon enough, as it regards to crypto.</p>\n<h2>Why are Decentralization and Anonymity Important for Crypto?</h2>\n<p>Continuing on with the section, allow me to give you a very quick history lesson - specifically, one that is related to <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin.

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As you may or may not know, the decentralized blockchain Bitcoin was created by someone known as <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/who-is-satoshi-nakamoto/">Satoshi Nakamoto</strong></a>. The identity of the creator <em>(or creators?)</em> of BTC is unknown, to this day, but that&rsquo;s beside the point - instead, let&rsquo;s take a look at <strong>WHY Bitcoin was created.</strong></p>\n<p>The very first block of Bitcoin&rsquo;s blockchain was created <em>(mined)</em> on January 3, 2009. The timing isn&rsquo;t a coincidence, either - within this first block, called <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-genesis-block/">the Genesis block</strong></a>, Satoshi left a message reading:</p>\n<p><em>\"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.\"</em></p>\n<p>This was a headline taken from The London Times. If you&rsquo;re sharp, you might have connected the dots - <strong>Bitcoin&rsquo;s inception came right after the Financial Crisis of 2008.</strong> The popular belief dictates that Bitcoin was created to <em>&ldquo;take the financial power away from governments and hedge funds, and give it back to the ordinary people&rdquo;.</em> I&rsquo;m somewhat paraphrasing, but you get the idea.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Decentralized blockchain: Financial crisis.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/decentralization_anonimity_in_crypto_02.o.jpg/" alt=\"Decentralized blockchain: Financial crisis.\" width=\"1000\" height=\"249\" /></p>\n<p>Now, this should help you understand why decentralization and blockchain anonymity are so important for crypto, in a very fundamental sense. Many crypto enthusiasts believe that, in order to have full power over your money, you must remain anonymous, and that the technology behind that form of money - in our case, it&rsquo;s the blockchain tech behind crypto - must remain decentralized, at all cost.</p>\n<p>The same enthusiasts claim that, <strong>once centralization sets in, there&rsquo;s always a risk for another financial crisis to happen</strong>, and - once again - big hedge funds and major banks would get bailed out, with your common, everyday people absorbing the full blow of the crisis.</p>\n<p>In a super-quick nutshell, this is the core philosophy behind crypto - one that many enthusiasts hold, to this day. It&rsquo;s a very controversial topic, though - the reason behind the controversy has to do with mass adoption, and a term called &ldquo;<a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-know-your-customer-kyc/">KYC&rdquo;.

/n

&ldquo;KYC&rdquo; stands for &ldquo;Know Your Customer&rdquo;. It&rsquo;s a term related to financial regulations, and essentially, it refers to the fact that all financial institutions must identify their customers and clients. This is true with cryptocurrency exchange platforms, as well.</p>\n<p>On one hand, you have the philosophy behind crypto - <strong>blockchain decentralization and anonymity.</strong> On the other hand, in order for cryptocurrencies to become truly mainstream, and blockchain technology to be massively adopted and widespread, <strong>regulation is absolutely crucial</strong> - it would preserve order, and remove a huge chunk of potential scams and theft attempts from the equation.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Decentralized blockchain: The philosophy behind crypto.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/decentralization_anonimity_in_crypto_03.o.jpg/" alt=\"Decentralized blockchain: The philosophy behind crypto.\" width=\"1000\" height=\"207\" /></p>\n<p>So, as you can see, it&rsquo;s a very tricky topic! Most people agree that regulation is the way to go - still, however, many crypto projects aim to circumvent this, to an extent. Partial decentralization, open-source code, doxed teams, and so on - it&rsquo;s a huge topic that needs a separate section, of its own!</p>\n<p>Now, do keep in mind that <strong>there&rsquo;s a difference between blockchain-based projects and platforms such as cryptocurrency exchanges or lending services.</strong> With the former, decentralization is still completely possible, even with regulatory oversight - the aforementioned KYC regulations mostly imply to companies that allow individuals to buy, sell, or transact with cryptocurrencies in any other way.</p>\n<h2>Decentralization and Anonymity in Crypto</h2>\n<p>Up to this point in the section, we&rsquo;ve talked about decentralization and anonymity, as standalone concepts, and I&rsquo;ve also told you about why these concepts are so important to the crypto world.</p>\n<p>Now, allow me to tell you about just how both of said concepts manifest themselves for your average crypto enthusiast!</p>\n<p>So, starting off with decentralized blockchains, we must go back to the shop example I gave at the beginning of this section. In the world of crypto, there&rsquo;s a term called &ldquo;<a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-the-dao/">DAO&rdquo;. Broken down, it abbreviates as a <strong>&ldquo;Decentralized Autonomous Organization&rdquo;.</strong></p>\n<p>That sounds super-fancy, yes, I know. However, it&rsquo;s actually quite simple to understand. If you&rsquo;d like to learn about DAOs in an in-depth manner, check out <a href=https://www.bitdegree.org/"/crypto/learn/what-is-a-dao-in-crypto/">a section</strong></a> written on this topic - for now, though, let&rsquo;s take an entry-level look at what they are.</p>\n<p>A DAO is a community of people that all have the ability to vote on proposals, changes, updates, and other matters of a specific crypto project. This voting happens with the help of the <strong>native tokens</strong> of that said project. So, as far as our shop example is concerned, it would look a little something like this:</p>\n<p>Each employee within the decentralized shop would have the ability to purchase or acquire special candies, depending on their dedication and impact on the way that the shop is performing. Every month, employees would be able to suggest changes to how the shop operates, as well as vote on different proposals made by others. In order to vote, you would need to place your candy into a special jar - the more candy it is that you place, the stronger your vote will become.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Decentralized blockchain: Explanation of DAO.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/decentralization_anonimity_in_crypto_04.o.jpg/" alt=\"Decentralized blockchain: Explanation of DAO.\" width=\"1000\" height=\"556\" /></p>\n<p>Naturally, in reality, the system is much more complex than that. But this should still give you a pretty good general idea of how DAOs work, and how decentralized projects are managed, in the first place!</p>\n<p>Now, when it comes to anonymity, it gets even more interesting. Remember the computer game example I gave earlier? Well, when interacting with various decentralized, blockchain-powered projects, you would use your <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-wallet/">cryptocurrency wallet</strong></a> - your public wallet address would act as your alias on the blockchain!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Decentralized blockchain: Anonimity.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/decentralization_anonimity_in_crypto_05.o.jpg/" alt=\"Decentralized blockchain: Anonimity.\" width=\"1000\" height=\"497\" /></p>\n<p><strong>In short, with the help of your cryptocurrency wallet, you are able to remain anonymous on the blockchain.</strong> All of the transactions that you perform will be public, for everyone to see, but no one will know that it&rsquo;s YOU who&rsquo;s performing those transactions - well, unless you tell them.</p>\n<h2>Final Thoughts</h2>\n<p>With all that we&rsquo;ve talked about in this section, I want you to remember that we&rsquo;ve only scratched the surface - both decentralization and anonymity are complex topics, as they relate to crypto! On top of that, nothing is ever black or white - whether it be KYC regulations, decentralized exchanges, anonymity, or else, all of these topics involve complex intricacies, and should thus be viewed appropriately, as well.</p>\n<p>That being said, I do hope that this section helped you with clearing the major question up! Now that you understand the roles that decentralization and anonymity play when it comes to your everyday crypto-related experiences, you&rsquo;re ready to start digging deeper into each of these topics!</p>","meta_title":"Decentralized Blockchains: What Exactly Does It Mean?","meta_description":"Trying to figure out what is a decentralized blockchain? Wondering how decentralization differs from centralization? Find all answers here!","meta_keywords":"decentralized blockchain, blockchain decentralized, is blockchain decentralized, decentralized blockchain technology, most decentralized blockchain, centralized vs decentralized blockchain, is blockchain anonymous, blockchain anonymity","order":2,"language":"en","created_at":"2022-06-29T05:25:24.000000Z","updated_at":"2023-05-04T10:25:24.000000Z","modified_content":"<p>In this section, I&rsquo;m going to tell you about anonymous and decentralized <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-blockchain/">blockchains!

/n

The term &ldquo;decentralized blockchain&rdquo; is definitely something you&rsquo;ve encountered, if you&rsquo;ve spent even a day in the crypto space. In fact, we often get so numb to terms such as these, that we don&rsquo;t even really give them much thought!</p>\n<p>However, did you know that <strong>decentralization and anonymity</strong> are among the fundamental cornerstones of the crypto industry, as a whole? That being the case, however, these two concepts are also very controversial, especially when it comes to crypto regulations.</p>\n<p>In this section, you&rsquo;ll learn about decentralization and anonymity, as they relate to the world of crypto. More specifically, I&rsquo;ll tell you what these concepts mean, how they relate to crypto, as well as why are they important for blockchain-powered projects, in general.</p>\n<p><em>Let&rsquo;s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"Is Decentralized Anonymous Blockchain a Myth? (Explained!)\"\n title=\"Is Decentralized Anonymous Blockchain a Myth? (Explained!)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: Anonymous & Decentralized Blockchains: The Cornerstone of Crypto</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"Anonymous & Decentralized Blockchains: The Cornerstone of Crypto\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"pLmw3W9IRiE\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">Is Decentralized Anonymous Blockchain a Myth? (Explained!)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/pLmw3W9IRiE/hq720.jpg/"/n alt=\"Is Decentralized Anonymous Blockchain a Myth? (Explained!)\"\n title=\"Is Decentralized Anonymous Blockchain a Myth? (Explained!)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"Is Decentralized Anonymous Blockchain a Myth? (Explained!)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"pLmw3W9IRiE\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>What are &ldquo;Decentralization&rdquo; and &ldquo;Anonymity&rdquo; in Crypto?</h2>\n<p>Before we can really get into the main points of this section, and analyze centralized VS decentralized blockchain technology, it&rsquo;s important to break down what concepts such as a &ldquo;decentralized blockchain&rdquo; mean, to begin with! While it may seem self-explanatory at first, it&rsquo;s like the famous meme of the iceberg - once you start looking into it, you see that there&rsquo;s a lot more than initially meets the eye.</p>\n<p>So, let&rsquo;s start with <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-decentralization/">decentralization. As the term implies, decentralization refers to something lacking a single, centralized governing authority. So, imagine that there are two shops in your town - one centralized, and the other - decentralized.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Decentralized blockchain: Centralization vs Decentralization.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/decentralization_anonimity_in_crypto_01.o.jpg/" alt=\"Decentralized blockchain: Centralization vs Decentralization.\" width=\"1000\" height=\"273\" /></p>\n<p>The centralized shop will function just like you&rsquo;d expect - there are employers and employees, everyone has their own, designated roles and responsibilities, and <strong>there&rsquo;s always some form of higher management that you need to report to.</strong></p>\n<p>With this traditional shop model, there is a set specific hierarchy within the system, and thus, there are designated parties that make the executive decisions about the direction that the shop will take - whether or not it will sell a specific chocolate bar, how many employees it will hire VS how many will be laid off, what are the salaries of each employee, and so on.</p>\n<p>Now, the decentralized shop is where things get much more interesting. <strong>In this case, there is no single, central authority</strong> - no manager, director, or CEO to oversee the processes and give orders. Instead, each employee within the shop is responsible for the well-being of the establishment - they all make the executive decisions, all have a say in the direction that the shop is going, and are all able to make a huge influence on the end results.</p>\n<p><em>Sounds awesome, but how does it work in crypto?</em> Well, I&rsquo;ll get to that - for now, I just want you to understand the general premise of decentralization, as a concept.</p>\n<p><strong>Next up is blockchain anonymity.</strong> Once again, at first glance, the term is rather self-explanatory - it&rsquo;s when you are able to do something while remaining anonymous, or, in other words, without revealing your true identity.</p>\n<p>Imagine a situation in an online game - <em>say, something like League of Legends.</em> When you play the game, you&rsquo;re able to talk to your teammates, and write messages. However, you do so without revealing your true identity, and under some sort of an alias - thus, you&rsquo;re able to remain anonymous, at least to other players!</p>\n<p>Now, evidently, this isn&rsquo;t an ideal example, since you&rsquo;re still doxed to the company behind the game, especially if you make any online purchases on their platform. But we&rsquo;ll get to that soon enough, as it regards to crypto.</p>\n<h2>Why are Decentralization and Anonymity Important for Crypto?</h2>\n<p>Continuing on with the section, allow me to give you a very quick history lesson - specifically, one that is related to <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin.

/n

As you may or may not know, the decentralized blockchain Bitcoin was created by someone known as <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/who-is-satoshi-nakamoto/">Satoshi Nakamoto</strong></a>. The identity of the creator <em>(or creators?)</em> of BTC is unknown, to this day, but that&rsquo;s beside the point - instead, let&rsquo;s take a look at <strong>WHY Bitcoin was created.</strong></p>\n<p>The very first block of Bitcoin&rsquo;s blockchain was created <em>(mined)</em> on January 3, 2009. The timing isn&rsquo;t a coincidence, either - within this first block, called <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-genesis-block/">the Genesis block</strong></a>, Satoshi left a message reading:</p>\n<p><em>\"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.\"</em></p>\n<p>This was a headline taken from The London Times. If you&rsquo;re sharp, you might have connected the dots - <strong>Bitcoin&rsquo;s inception came right after the Financial Crisis of 2008.</strong> The popular belief dictates that Bitcoin was created to <em>&ldquo;take the financial power away from governments and hedge funds, and give it back to the ordinary people&rdquo;.</em> I&rsquo;m somewhat paraphrasing, but you get the idea.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Decentralized blockchain: Financial crisis.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/decentralization_anonimity_in_crypto_02.o.jpg/" alt=\"Decentralized blockchain: Financial crisis.\" width=\"1000\" height=\"249\" /></p>\n<p>Now, this should help you understand why decentralization and blockchain anonymity are so important for crypto, in a very fundamental sense. Many crypto enthusiasts believe that, in order to have full power over your money, you must remain anonymous, and that the technology behind that form of money - in our case, it&rsquo;s the blockchain tech behind crypto - must remain decentralized, at all cost.</p>\n<p>The same enthusiasts claim that, <strong>once centralization sets in, there&rsquo;s always a risk for another financial crisis to happen</strong>, and - once again - big hedge funds and major banks would get bailed out, with your common, everyday people absorbing the full blow of the crisis.</p>\n<p>In a super-quick nutshell, this is the core philosophy behind crypto - one that many enthusiasts hold, to this day. It&rsquo;s a very controversial topic, though - the reason behind the controversy has to do with mass adoption, and a term called &ldquo;<a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-know-your-customer-kyc/">KYC&rdquo;.

/n

&ldquo;KYC&rdquo; stands for &ldquo;Know Your Customer&rdquo;. It&rsquo;s a term related to financial regulations, and essentially, it refers to the fact that all financial institutions must identify their customers and clients. This is true with cryptocurrency exchange platforms, as well.</p>\n<p>On one hand, you have the philosophy behind crypto - <strong>blockchain decentralization and anonymity.</strong> On the other hand, in order for cryptocurrencies to become truly mainstream, and blockchain technology to be massively adopted and widespread, <strong>regulation is absolutely crucial</strong> - it would preserve order, and remove a huge chunk of potential scams and theft attempts from the equation.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Decentralized blockchain: The philosophy behind crypto.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/decentralization_anonimity_in_crypto_03.o.jpg/" alt=\"Decentralized blockchain: The philosophy behind crypto.\" width=\"1000\" height=\"207\" /></p>\n<p>So, as you can see, it&rsquo;s a very tricky topic! Most people agree that regulation is the way to go - still, however, many crypto projects aim to circumvent this, to an extent. Partial decentralization, open-source code, doxed teams, and so on - it&rsquo;s a huge topic that needs a separate section, of its own!</p>\n<p>Now, do keep in mind that <strong>there&rsquo;s a difference between blockchain-based projects and platforms such as cryptocurrency exchanges or lending services.</strong> With the former, decentralization is still completely possible, even with regulatory oversight - the aforementioned KYC regulations mostly imply to companies that allow individuals to buy, sell, or transact with cryptocurrencies in any other way.</p>\n<h2>Decentralization and Anonymity in Crypto</h2>\n<p>Up to this point in the section, we&rsquo;ve talked about decentralization and anonymity, as standalone concepts, and I&rsquo;ve also told you about why these concepts are so important to the crypto world.</p>\n<p>Now, allow me to tell you about just how both of said concepts manifest themselves for your average crypto enthusiast!</p>\n<p>So, starting off with decentralized blockchains, we must go back to the shop example I gave at the beginning of this section. In the world of crypto, there&rsquo;s a term called &ldquo;<a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-the-dao/">DAO&rdquo;. Broken down, it abbreviates as a <strong>&ldquo;Decentralized Autonomous Organization&rdquo;.</strong></p>\n<p>That sounds super-fancy, yes, I know. However, it&rsquo;s actually quite simple to understand. If you&rsquo;d like to learn about DAOs in an in-depth manner, check out <a href=https://www.bitdegree.org/"/crypto/learn/what-is-a-dao-in-crypto/">a section</strong></a> written on this topic - for now, though, let&rsquo;s take an entry-level look at what they are.</p>\n<p>A DAO is a community of people that all have the ability to vote on proposals, changes, updates, and other matters of a specific crypto project. This voting happens with the help of the <strong>native tokens</strong> of that said project. So, as far as our shop example is concerned, it would look a little something like this:</p>\n<p>Each employee within the decentralized shop would have the ability to purchase or acquire special candies, depending on their dedication and impact on the way that the shop is performing. Every month, employees would be able to suggest changes to how the shop operates, as well as vote on different proposals made by others. In order to vote, you would need to place your candy into a special jar - the more candy it is that you place, the stronger your vote will become.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Decentralized blockchain: Explanation of DAO.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/decentralization_anonimity_in_crypto_04.o.jpg/" alt=\"Decentralized blockchain: Explanation of DAO.\" width=\"1000\" height=\"556\" /></p>\n<p>Naturally, in reality, the system is much more complex than that. But this should still give you a pretty good general idea of how DAOs work, and how decentralized projects are managed, in the first place!</p>\n<p>Now, when it comes to anonymity, it gets even more interesting. Remember the computer game example I gave earlier? Well, when interacting with various decentralized, blockchain-powered projects, you would use your <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-wallet/">cryptocurrency wallet</strong></a> - your public wallet address would act as your alias on the blockchain!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Decentralized blockchain: Anonimity.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/decentralization_anonimity_in_crypto_05.o.jpg/" alt=\"Decentralized blockchain: Anonimity.\" width=\"1000\" height=\"497\" /></p>\n<p><strong>In short, with the help of your cryptocurrency wallet, you are able to remain anonymous on the blockchain.</strong> All of the transactions that you perform will be public, for everyone to see, but no one will know that it&rsquo;s YOU who&rsquo;s performing those transactions - well, unless you tell them.</p>\n<h2>Final Thoughts</h2>\n<p>With all that we&rsquo;ve talked about in this section, I want you to remember that we&rsquo;ve only scratched the surface - both decentralization and anonymity are complex topics, as they relate to crypto! On top of that, nothing is ever black or white - whether it be KYC regulations, decentralized exchanges, anonymity, or else, all of these topics involve complex intricacies, and should thus be viewed appropriately, as well.</p>\n<p>That being said, I do hope that this section helped you with clearing the major question up! Now that you understand the roles that decentralization and anonymity play when it comes to your everyday crypto-related experiences, you&rsquo;re ready to start digging deeper into each of these topics!</p>","preview_url":"https://www.bitdegree.org/crypto/learn/decentralized-blockchain","youtube_video":{"id":65,"channel_id":1,"sort":34,"video_title":"Is Decentralized Anonymous Blockchain a Myth? (Explained!)","description":"Is Decentralized Anonymous Blockchain a Myth?\n\nBoth decentralization and anonymity are core, fundamental aspects of the crypto world. While these terms are being thrown around every single day, however, they are actually quite complex, and, if understood properly, can really help you analyze the crypto industry better. \n\nIn this video, I’ll tell you all about decentralized anonymous blockchain, as far as these concepts relate to crypto. Specifically, you’ll learn about what do decentralized blockchain and anonymous blockchain mean, how are they present within blockchain tech, and why you should care, in the first place.\n\nDo you think decentralization and anonymity are essential parts of crypto? Or, perhaps, you believe that these concepts are far overrated? Share your thoughts in the comment section down below!\n\nVideo Time Table:\n\n0:00 Introduction to Decentralization & Anonymity in Crypto\n0:56 What is a Decentralized Blockchain?\n2:30 What is an Anonymous Blockchain?\n3:09 Decentralization & Anonymity Importance for Crypto\n6:32 Decentralization & Anonymity Examples in Crypto\n8:45 Wrap-up: Decentralization & Anonymity in Crypto\n\nMore Related Videos:\n?What is Blockchain? https://www.youtube.com/watch?v=O2-XxMo5PFs\n?What is a DAO? https://www.youtube.com/watch?v=toSViQmtqFQ\n?What is DeFi? https://www.youtube.com/watch?v=GVeoES3lKfQ\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#DecentralizedBlockchain #BlockchainDecentralized #IsBlockchainAnonymous","video_id":"pLmw3W9IRiE","duration":567,"view_count":507,"thumbnail_url":"https://i.ytimg.com/vi/pLmw3W9IRiE/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-06-30 15:13:42","created_at":"2022-06-30T23:00:02.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}},"featured_image":{"id":7205,"uuid":"c5d6f6a7-4914-4d6b-9fdd-e94dfb0bae82","public_url":"https://assets.bitdegree.org/crypto/storage/media/decentralized-blockchain-featured-image.o.jpg","path":"crypto/storage/media/decentralized-blockchain-featured-image.o.jpg","original_path":"crypto/storage/media/decentralized-blockchain-featured-image.jpg","name":"decentralized-blockchain-featured-image.o.jpg","original_name":"decentralized-blockchain-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"136.00KB"}},"chapterList":[{"id":1,"title":"Blockchain","slug":"blockchain","updated":null,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/learn-blockchain.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/blockchain-101.jpg","rating":100,"sections":[{"slug":"what-is-blockchain","title":"What is the Blockchain?","featured_image_id":6412,"status":"published","chapter_id":1,"language":"en","order":1,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/what-is-blockchain","featured_image":{"id":6412,"uuid":"152ba579-ce8d-488a-9e06-bcd99e976b7d","public_url":"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-626fbe085a0cd.o.jpg","path":"crypto/storage/media/what-is-blockchain-626fbe085a0cd.o.jpg","original_path":"crypto/storage/media/what-is-blockchain-626fbe085a0cd.jpg","name":"what-is-blockchain-626fbe085a0cd.o.jpg","original_name":"what-is-blockchain.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"93.86KB"},"youtube_video":null},{"slug":"decentralized-blockchain","title":"Anonymous & Decentralized Blockchains: The Cornerstone of Crypto","featured_image_id":7205,"status":"published","chapter_id":1,"language":"en","order":2,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/decentralized-blockchain","featured_image":{"id":7205,"uuid":"c5d6f6a7-4914-4d6b-9fdd-e94dfb0bae82","public_url":"https://assets.bitdegree.org/crypto/storage/media/decentralized-blockchain-featured-image.o.jpg","path":"crypto/storage/media/decentralized-blockchain-featured-image.o.jpg","original_path":"crypto/storage/media/decentralized-blockchain-featured-image.jpg","name":"decentralized-blockchain-featured-image.o.jpg","original_name":"decentralized-blockchain-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"136.00KB"},"youtube_video":null},{"slug":"blockchain-transaction","title":"What is a Blockchain Transaction in Crypto?","featured_image_id":7397,"status":"published","chapter_id":1,"language":"en","order":3,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/blockchain-transaction","featured_image":{"id":7397,"uuid":"e60dff45-4c5d-4b44-a2c1-a27e49f700e7","public_url":"https://assets.bitdegree.org/crypto/storage/media/blockchain-transaction-featured-mage.o.jpg","path":"crypto/storage/media/blockchain-transaction-featured-mage.o.jpg","original_path":"crypto/storage/media/blockchain-transaction-featured-mage.jpg","name":"blockchain-transaction-featured-mage.o.jpg","original_name":"blockchain-transaction-featured-mage.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"85.83KB"},"youtube_video":null},{"slug":"crypto-fees","title":"The Different Types of Crypto Fees Explained","featured_image_id":7442,"status":"published","chapter_id":1,"language":"en","order":4,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/crypto-fees","featured_image":{"id":7442,"uuid":"f554012e-7fe1-4636-9718-81abd3499361","public_url":"https://assets.bitdegree.org/crypto/storage/media/crypto-fees-featured-image.o.jpg","path":"crypto/storage/media/crypto-fees-featured-image.o.jpg","original_path":"crypto/storage/media/crypto-fees-featured-image.jpg","name":"crypto-fees-featured-image.o.jpg","original_name":"crypto-fees-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"78.90KB"},"youtube_video":null},{"slug":"what-is-bridging-in-crypto","title":"The Key Notion Behind the Concept of Bridging in Crypto","featured_image_id":7662,"status":"published","chapter_id":1,"language":"en","order":5,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/what-is-bridging-in-crypto","featured_image":{"id":7662,"uuid":"67564127-d9df-451e-8767-c28930039dc8","public_url":"https://assets.bitdegree.org/crypto/storage/media/what-is-crypto-bridging-featured-image.o.jpg","path":"crypto/storage/media/what-is-crypto-bridging-featured-image.o.jpg","original_path":"crypto/storage/media/what-is-crypto-bridging-featured-image.jpg","name":"what-is-crypto-bridging-featured-image.o.jpg","original_name":"what-is-crypto-bridging-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"106.21KB"},"youtube_video":null},{"slug":"types-of-blockchains","title":"Different Types of Blockchains: What to Look Out 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Chapter 1: Blockchain

Anonymous & Decentralized Blockchains: The Cornerstone of Crypto

Did you know that Monero is frequently regarded as the most anonymous and decentralized blockchain?
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In this section, I’m going to tell you about anonymous and decentralized blockchains!

The term “decentralized blockchain” is definitely something you’ve encountered, if you’ve spent even a day in the crypto space. In fact, we often get so numb to terms such as these, that we don’t even really give them much thought!

However, did you know that decentralization and anonymity are among the fundamental cornerstones of the crypto industry, as a whole? That being the case, however, these two concepts are also very controversial, especially when it comes to crypto regulations.

In this section, you’ll learn about decentralization and anonymity, as they relate to the world of crypto. More specifically, I’ll tell you what these concepts mean, how they relate to crypto, as well as why are they important for blockchain-powered projects, in general.

Let’s get to it!

Is Decentralized Anonymous Blockchain a Myth? (Explained!)

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Is Decentralized Anonymous Blockchain a Myth? (Explained!)

Is Decentralized Anonymous Blockchain a Myth? (Explained!) Is Decentralized Anonymous Blockchain a Myth? (Explained!)

What are “Decentralization” and “Anonymity” in Crypto?

Before we can really get into the main points of this section, and analyze centralized VS decentralized blockchain technology, it’s important to break down what concepts such as a “decentralized blockchain” mean, to begin with! While it may seem self-explanatory at first, it’s like the famous meme of the iceberg - once you start looking into it, you see that there’s a lot more than initially meets the eye.

So, let’s start with decentralization. As the term implies, decentralization refers to something lacking a single, centralized governing authority. So, imagine that there are two shops in your town - one centralized, and the other - decentralized.

Decentralized blockchain: Centralization vs Decentralization.

The centralized shop will function just like you’d expect - there are employers and employees, everyone has their own, designated roles and responsibilities, and there’s always some form of higher management that you need to report to.

With this traditional shop model, there is a set specific hierarchy within the system, and thus, there are designated parties that make the executive decisions about the direction that the shop will take - whether or not it will sell a specific chocolate bar, how many employees it will hire VS how many will be laid off, what are the salaries of each employee, and so on.

Now, the decentralized shop is where things get much more interesting. In this case, there is no single, central authority - no manager, director, or CEO to oversee the processes and give orders. Instead, each employee within the shop is responsible for the well-being of the establishment - they all make the executive decisions, all have a say in the direction that the shop is going, and are all able to make a huge influence on the end results.

Sounds awesome, but how does it work in crypto? Well, I’ll get to that - for now, I just want you to understand the general premise of decentralization, as a concept.

Next up is blockchain anonymity. Once again, at first glance, the term is rather self-explanatory - it’s when you are able to do something while remaining anonymous, or, in other words, without revealing your true identity.

Imagine a situation in an online game - say, something like League of Legends. When you play the game, you’re able to talk to your teammates, and write messages. However, you do so without revealing your true identity, and under some sort of an alias - thus, you’re able to remain anonymous, at least to other players!

Now, evidently, this isn’t an ideal example, since you’re still doxed to the company behind the game, especially if you make any online purchases on their platform. But we’ll get to that soon enough, as it regards to crypto.

Why are Decentralization and Anonymity Important for Crypto?

Continuing on with the section, allow me to give you a very quick history lesson - specifically, one that is related to Bitcoin.

As you may or may not know, the decentralized blockchain Bitcoin was created by someone known as Satoshi Nakamoto. The identity of the creator (or creators?) of BTC is unknown, to this day, but that’s beside the point - instead, let’s take a look at WHY Bitcoin was created.

The very first block of Bitcoin’s blockchain was created (mined) on January 3, 2009. The timing isn’t a coincidence, either - within this first block, called the Genesis block, Satoshi left a message reading:

"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks."

This was a headline taken from The London Times. If you’re sharp, you might have connected the dots - Bitcoin’s inception came right after the Financial Crisis of 2008. The popular belief dictates that Bitcoin was created to “take the financial power away from governments and hedge funds, and give it back to the ordinary people”. I’m somewhat paraphrasing, but you get the idea.

Decentralized blockchain: Financial crisis.

Now, this should help you understand why decentralization and blockchain anonymity are so important for crypto, in a very fundamental sense. Many crypto enthusiasts believe that, in order to have full power over your money, you must remain anonymous, and that the technology behind that form of money - in our case, it’s the blockchain tech behind crypto - must remain decentralized, at all cost.

The same enthusiasts claim that, once centralization sets in, there’s always a risk for another financial crisis to happen, and - once again - big hedge funds and major banks would get bailed out, with your common, everyday people absorbing the full blow of the crisis.

In a super-quick nutshell, this is the core philosophy behind crypto - one that many enthusiasts hold, to this day. It’s a very controversial topic, though - the reason behind the controversy has to do with mass adoption, and a term called “KYC”.

“KYC” stands for “Know Your Customer”. It’s a term related to financial regulations, and essentially, it refers to the fact that all financial institutions must identify their customers and clients. This is true with cryptocurrency exchange platforms, as well.

On one hand, you have the philosophy behind crypto - blockchain decentralization and anonymity. On the other hand, in order for cryptocurrencies to become truly mainstream, and blockchain technology to be massively adopted and widespread, regulation is absolutely crucial - it would preserve order, and remove a huge chunk of potential scams and theft attempts from the equation.

Decentralized blockchain: The philosophy behind crypto.

So, as you can see, it’s a very tricky topic! Most people agree that regulation is the way to go - still, however, many crypto projects aim to circumvent this, to an extent. Partial decentralization, open-source code, doxed teams, and so on - it’s a huge topic that needs a separate section, of its own!

Now, do keep in mind that there’s a difference between blockchain-based projects and platforms such as cryptocurrency exchanges or lending services. With the former, decentralization is still completely possible, even with regulatory oversight - the aforementioned KYC regulations mostly imply to companies that allow individuals to buy, sell, or transact with cryptocurrencies in any other way.

Decentralization and Anonymity in Crypto

Up to this point in the section, we’ve talked about decentralization and anonymity, as standalone concepts, and I’ve also told you about why these concepts are so important to the crypto world.

Now, allow me to tell you about just how both of said concepts manifest themselves for your average crypto enthusiast!

So, starting off with decentralized blockchains, we must go back to the shop example I gave at the beginning of this section. In the world of crypto, there’s a term called “DAO”. Broken down, it abbreviates as a “Decentralized Autonomous Organization”.

That sounds super-fancy, yes, I know. However, it’s actually quite simple to understand. If you’d like to learn about DAOs in an in-depth manner, check out a section written on this topic - for now, though, let’s take an entry-level look at what they are.

A DAO is a community of people that all have the ability to vote on proposals, changes, updates, and other matters of a specific crypto project. This voting happens with the help of the native tokens of that said project. So, as far as our shop example is concerned, it would look a little something like this:

Each employee within the decentralized shop would have the ability to purchase or acquire special candies, depending on their dedication and impact on the way that the shop is performing. Every month, employees would be able to suggest changes to how the shop operates, as well as vote on different proposals made by others. In order to vote, you would need to place your candy into a special jar - the more candy it is that you place, the stronger your vote will become.

Decentralized blockchain: Explanation of DAO.

Naturally, in reality, the system is much more complex than that. But this should still give you a pretty good general idea of how DAOs work, and how decentralized projects are managed, in the first place!

Now, when it comes to anonymity, it gets even more interesting. Remember the computer game example I gave earlier? Well, when interacting with various decentralized, blockchain-powered projects, you would use your cryptocurrency wallet - your public wallet address would act as your alias on the blockchain!

Decentralized blockchain: Anonimity.

In short, with the help of your cryptocurrency wallet, you are able to remain anonymous on the blockchain. All of the transactions that you perform will be public, for everyone to see, but no one will know that it’s YOU who’s performing those transactions - well, unless you tell them.

Final Thoughts

With all that we’ve talked about in this section, I want you to remember that we’ve only scratched the surface - both decentralization and anonymity are complex topics, as they relate to crypto! On top of that, nothing is ever black or white - whether it be KYC regulations, decentralized exchanges, anonymity, or else, all of these topics involve complex intricacies, and should thus be viewed appropriately, as well.

That being said, I do hope that this section helped you with clearing the major question up! Now that you understand the roles that decentralization and anonymity play when it comes to your everyday crypto-related experiences, you’re ready to start digging deeper into each of these topics!

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