11mins read
Published on: Sep 10, 2024
#Crypto 360
Public ledgers in blockchain are transforming how data is stored with a clear, secure, and decentralised system.
➔ The public ledger in cryptocurrency records all transactions and makes them visible to everyone in the blockchain.
➔ This type of ledger is decentralised, and no single entity controls the operations; instead, many people can validate and store the transactions.
➔ The participants ensure the public ledger's immutability through cryptographic techniques, which means that recorded transactions cannot be altered or deleted.
➔ Public ledgers eliminate the role of intermediaries and automate processes, thus decreasing the probability of human error and making the verification process quicker.
➔ As the size of blockchain networks increases, storage space and transaction rates become complex.
The latest developments in technology, including blockchain, are transforming how data is stored and processed. This innovation includes a public ledger-- a critical system in cryptocurrencies like Bitcoin (BTC). These ledgers do not have a single controlling entity; rather, the transactions are checked and documented by many participants in the network, providing unalterable records of all transactions.
Public ledgers can be used for cryptocurrencies, supply chain management systems, and digital ID verification, where the records' reliability, transparency, and anonymity are essential. Despite their benefits, public ledgers have disadvantages, such as scaling, energy consumption, and privacy.
In this article, we will define a cryptocurrency public ledger, explain how it works, discuss the benefits and drawbacks associated with its use, and explain how it is different from a private ledger. We will also explain how to access a Bitcoin public ledger and answer common questions about public ledgers.
Traditional financial systems involve using a central authority, such as a bank, to store and keep records of financial transactions. A cryptocurrency public ledger is a distributed ledger that contains all transactions made in a blockchain network.
At the same time, a public ledger is distributed over many computers in the network, and no single entity owns the ledger. Each transaction is put in a block linked to other blocks through cryptographic algorithms. The ledger is public, and thus, anyone can view all the transactions made.
However, people's identities are usually protected through cryptographic means, offering some form of anonymity. Public ledgers are very important for cryptocurrencies as they enable efficient transfers of value without involving third parties and transactions that are open, easily traceable, and irreversible.
A cryptocurrency public ledger is based on a distributed network of nodes validating and recording transactions. Here is a step-by-step look at how they work:
• Transaction Initiation: To initiate a transaction, a user enters the address of the receiver and the quantity of cryptocurrency to be transferred. This transaction is then dispatched out to the network.
• Transaction Validation: The network nodes receive the transaction and check whether the sender has enough balance, check the signature, ensuring that the transaction adheres to the network’s guidelines.
• Block Creation: Once validated, the transaction is combined with others and put into a block. A node is then selected to create the new block based on a consensus mechanism adopted, such as proof of work or proof of stake.
• Block Verification and Addition: A new block is broadcast to the network, and other nodes check it to confirm its legitimacy. If most nodes confirm that the block is valid, it is incorporated into the blockchain, which is a public ledger.
• Consensus Mechanism: The network has used consensus to ensure all the nodes agree on the ledger's state. Such mechanisms are proof-of-work (PoW), proof-of-stake (PoS), and other models.
• Immutability and Security: Once a block is added to the blockchain, it cannot be changed unless all the subsequent blocks are altered. This means that consensus must be reached by most of the network.
A blockchain public ledger is mainly used to maintain an easily understandable, accurate and immutable list of all the activities occurring within a network. This ledger serves several important roles:
• Transparency: An open ledger lets anyone view the transaction record, making the network easily understandable, which helps create trust since the participant can confirm the transactions independently.
• Security: Once a transaction is recorded on the public ledger, it cannot be altered or deleted, a nature important in ensuring the blockchain is well protected.
• Decentralisation: While a single entity generally manages the ordinary ledgers, the nodes manage the blockchain's public ledger. This decentralisation eliminates the middlemen, thus minimising the chances of fraudulent activities and corruption.
• Efficiency: Public ledgers help validate transactions and keep records of them, eliminating the need for people to be involved and minimising the chances of making mistakes. This is especially beneficial in financial management, where timeliness and accuracy cannot be overlooked.
• Consensus: The public ledger helps all the nodes in the network have a common view of its current state.
The process of recording and verifying a cryptocurrency public ledger is divided into phases to properly record and verify each transaction in the system. Here is how it works:
A transaction is initiated for a user to move cryptocurrency to another user. This transaction involves information such as the sender and receiver's addresses, the amount being sent, and a signature to show that the sender is the account owner.
Image: Cryptocurrency ledger wallet
Then, the transaction is broadcast to the network so that nodes can validate it. Nodes check the transaction, the sender’s balance compared to the transaction, and determine if all the network rules are followed.
These transactions are then put into a block called ‘validated transactions.’ It contains a list of transactions, a time stamp, and the hash value of the previous block in the chain. The newly created block is then broadcast to the network to be validated by other nodes, who check the transactions and the block's hash.
After the confirmation, the block is included in the blockchain, and the public record is expanded. The network uses the consensus approach to ensure that all nodes have to validate the new block being added. To change a block, one must change all succeeding blocks, which would be practically impossible without controlling more than half of the network.
Cryptocurrency public ledgers offer several advantages that make them critical in blockchain technology:
• Decentralisation: Public ledgers are decentralised without an intermediary and require nodes to validate and store transactions. This way, no single entity can manipulate the system, which is a common problem in most systems since one party has control over the other.
• Transparency: Every operation within the network is recorded on a ledger that is accessible to everyone, ensuring transparency and oversight.
• Security: The public ledgers use cryptographic techniques to record transactions in a way that cannot be changed or deleted once they are recorded. This unchangeable nature ensures the blockchain's authenticity and prevents the alteration of the content.
• Efficiency: Public ledgers are less likely to contain human intervention and, therefore, can eliminate the possibility of errors and accelerate transaction validation.
• Trusted Environment: Public ledgers enable transactions in a system without intermediaries, meaning no individual or entity has power over the other.
• Cost Reduction: By eliminating the middlemen, public ledgers reduce the cost of cheque processing, thus making transactions cost-efficient. This has made blockchain technology effective in many fields, including financial industries and the supply chain.
Despite their numerous advantages, cryptocurrency public ledgers also have some disadvantages, including:
• Scalability Issues: As blockchain networks expand, the shared ledger will be larger and require more storage and computational capacity. This growth would pose challenges, such as the network slowing down and becoming costly to maintain.
• Energy Consumption: Public ledgers in blockchain, especially those that embrace the proof-of-work (PoW) consensus models, require massive computational power to check on transactions. Due to their high energy consumption, there is a broad concern about the environmental impact of blockchain technology.
• Transaction Speed: Public ledgers have the issue of transaction throughput, and this may deteriorate as the number of users increases. However, some disadvantages include the fact that traditional financial systems are faster than blockchain, making them less suitable for some applications.
• Complexity: Blockchain and public ledgers are complex technologies that require users' knowledge to manage and apply them correctly. This complexity makes it harder for individuals and companies that may not possess the technical knowledge to engage with blockchain-based models.
• Potential for Centralisation: While public ledgers in blockchain are intended to be censorship-resistant and do not rely on a central authority, a handful of stakeholders can control consensus algorithms such as proof-of-stake (PoS), hence dominate most of the network’s resources.
Public and private ledgers serve similar functions in recording and verifying transactions, but they differ in key ways:
① Public Ledger: Anyone can access it and check on transactions. Some examples are Bitcoin and Ethereum networks.
② Private Ledger: Access is limited to a certain number of subjects only. The ledger can only be used by authorised users, who can view and post information. Some examples include Hyperledger and Corda.
① Public Ledger: Public ledgers are decentralised, meaning no single entity oversees them. The network operates through consensus algorithms that involve all network stakeholders.
② Private Ledger: Coordinated, specifically by a given organisation or a set of organisations. The controlling entity dictates the standards and decides who can access the ledger.
① Public Ledger: The process is open, and all participants can see all the transactions. This ensures that everyone is accountable to each other.
② Private Ledger: The transactions are only visible to the participants authorised to access them, providing increased privacy and confidentiality.
① Public Ledger: This type of system is best for applications that require high levels of transparency and security and no central authority, such as cryptocurrency.
② Private Ledger: A private ledger is suitable for enterprise use when privacy, control, and adherence to the regulatory framework are paramount, including supply chains and company systems.
① Public Ledger: This type usually uses approaches such as proof of work (PoW) or proof of stake (PoS), in which the whole network participates.
② Private Ledger: It may use more efficient consensus algorithms, such as Byzantine fault tolerance, that are more suitable to the organisation.
Accessing the Bitcoin public ledger is easy and can be done through several methods:
• Blockchain Explorers: With a Bitcoin address, transaction ID, or block number, a user can view transaction information such as the amount, time, and addresses involved in the transaction.
• Full Node: Technophilic users can run the full node of the Bitcoin network. It stores the whole Bitcoin blockchain, meaning users can check and inspect transactions on their own from the blockchain. To become a full node, one must have a lot of memory and computing power since the blockchain's size exceeds 300 GB.
• Wallet Software: Most Bitcoin wallet applications have access to the public ledger, where users can check their history of transactions and other transactions that have been made in the network.
• APIs: Services such as Blockcypher make the Bitcoin public ledger accessible to developers through APIs. These APIs enable application-level access to transaction data and other blockchain-related information.
• Bitcoin ATMs: Some offer additional options, such as viewing the public ledger, checking balances, and confirming transactions.
• Mobile Apps: Mobile applications such as Mycelium and Electrum also give users an interface to interact with the Bitcoin public ledger and manage transactions.
The public ledger in blockchain technology is one of the most revolutionary concepts that helps cryptocurrencies and many other decentralised apps (dApps). It is more secure, transparent, and efficient than any other digital transaction model, and hence, it has a bright future.
Public ledgers have numerous uses—from reshaping financial systems to providing new ways of identity in the digital world—and they make a positive impact in handling transactions.
Still, there are issues that need to be solved: first, scalability; second, energy consumption; and third, privacy issues that hinder it from achieving its full potential. Thus, the public ledger will need to develop further as a response to advancing blockchain technology towards a decentralised future.
Despite challenges along the way, public ledgers present many opportunities. They have the potential to build on existing innovations and fill the gaps in existing systems to offer a new, more transparent, secure, and efficient cryptocurrency transactions environment.
To access the Bitcoin public ledger, you can use blockchain explorers, full nodes, wallet software, APIs, Bitcoin ATMs, and mobile apps.
A blockchain public ledger is a database used in a blockchain network to store details of all transactions that occur in the network.
Public ledgers have characteristics including transparency, security, efficiency, and—most importantly—a decentralised environment.
Some disadvantages of blockchain include the fact that it is not easily scalable, it is energy-demanding, transaction speeds are slow, and it can become centralised, which can raise questions about privacy.
A public ledger is accessible to anyone who wishes to monitor it but is not centralised. In contrast, a private ledger is only accessible to certain people and is centralised.
A consensus mechanism is a process by which all the nodes in the network agree on the ledger's state to make the blockchain system more secure.
No, because records on the public ledger cannot be reversed, changed or deleted once they have been added to the ledger.
Decentralisation eliminates the possibility of a single entity managing the ledger and minimises the possibilities of fraud, corruption and censorship.
Some areas where public ledgers are applied in real life include cryptocurrency, supply chain management, digital ID, DeFi, and many others.
The use of the public ledger, especially those based on proof-of-work, has been associated with high energy consumption, which has become a concern regarding their environmental impact. This has resulted in the search for more efficient and eco-friendly solutions.
This article is for informational purposes only and not intended as investment or financial advice. It contains opinions and speculations that are subject to change without notice.
The author and publisher disclaim any liability for decisions made based on the content of this article. Readers are advised to conduct their own research and consult a financial advisor before making investment decisions.
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