Public ledger
The public ledger in terms of cryptocurrency is a comprehensive record of all transactions that have ever occurred across a particular cryptocurrency network. This digital, distributed ledger involves a range of computers, known as nodes, that hold and maintain the same record of transactions.
Understanding the Concept
In traditional financial systems, a central authority like a bank maintains a ledger of transactions. In contrast, cryptocurrencies use a decentralized structure, where the public ledger is maintained by numerous participants worldwide. Anyone can become a participant and help maintain this ledger. As the ledger is open to everyone, it significantly enhances transparency and decreases the chances of fraudulent activities.
How it Works
Here's step by step how the public ledger system works:
- When a cryptocurrency transaction occurs, this transaction is broadcasted to all the nodes in the network.
- Nodes scan for such transactions and group them into 'blocks'.
- These blocks then are joined together in a chain, creating a so-called blockchain, which is a type of public ledger.
- The nodes validate the transaction through a process known as 'mining'.
- Once the transaction is validated, it's added to the blockchain.
Security of Public Ledger
Given that the transaction information is spread across numerous computers, it's extremely difficult to alter a transaction once it's been added to the ledger. If someone tries to alter a transaction, it would require changing all subsequent blocks and the copies of the ledger on all nodes. This is practically impossible, hence making the public ledger system highly secure.
Importance in Cryptocurrency
The public ledger system is an integral part of cryptocurrencies. It allows for transparency and decentralization, which are major selling points for cryptocurrencies. Moreover, it guards against double-spending, a scenario in which a user would attempt to spend the same digital coin twice.