Record keeping has long been an essential strategy in ensuring accurate analysis of data including prices and transactions. A public ledger is an ancient record-keeping method that was and is still in use. Back then public ledgers were tangible records that detailed information such as commodity prices and market analysis and were available to the public. This was for viewing and verification.
Recent technological advancements including cryptocurrencies and blockchain-based systems employ similar record-keeping methods. This article explores public ledgers and how they work in the blockchain ecosystem.
What is a Public Ledger?
A public ledger is a record-keeping system that includes and maintains each participant’s identity and transactions. Understanding that cryptocurrencies are decentralized and encrypted, digital artwork like NFTs and crypto tokens can be safely exchanged between participants in a blockchain network. The public ledger records the transactions of the participants, their balances, and their identities in the network. However, their identities are masked in a secure anonymous (pseudo) form.
Public ledgers are decentralized meaning that no central authorities have access to the participants’ identities or transactions. Also, transactions can only be verified by both participants in the network. These transactions are only possible after authentication of the sender’s liquidity. In case it’s faulty, the transaction is discarded.
Various intrinsic features of the public ledger including encryption, consensus algorithms, and reward mechanisms make the public ledger secure and record genuine transactions.
How Public Ledgers Work
Public ledgers work similarly to bank records. Considering a transaction where a bank processes a transaction worth $100, the bank records have to ensure the sender’s account has sufficient funds. It also ensures that the exact amount is debited from the account and credited to the receiver’s account. Moreover, the transaction details in a cryptocurrency public ledger are similar to these bank records and are queried by the participants, then verified. A difference between bank records and cryptocurrency public ledgers is that there isn’t any central authority behind these crypto public ledgers.
To be precise, a public ledger records the transaction confirmed by a validator or a miner and then stores it in the blockchain. The public ledger is used to verify ownership of digital assets and artwork. It also ensures the record-keeping legitimacy based on its immutability. Moreover, a blockchain is a public ledger that records block transaction details. Record-keeping is done after suitable authentication and verification by the designated participants of the network.
Confirmed transactions recorded in the public ledger are detailed from the start and creation of the cryptocurrencies. The selected participants also referred to as full nodes have the entire ledger on their devices which are connected to the crypto network. The public ledger is distributed when participants connect to the network and contribute to the blockchain activities, keeping it functional.
Risks Involved with Public Ledgers
Regardless of public ledgers being secure, they present risks nonetheless. Blockchain public ledger records every transaction from the creation of a digital asset and transactions that will occur in the network. This presents a challenge of balancing the long detailed transactions and still scaling the capacity to record new transactions, which are growing in number. As such, this can be a handful.
Also, there are concerns that public ledgers might be targets for cybercriminals like hackers. It’s because this public ledger contains all records and transactions that can be traced since the creation of a digital asset. Even central authorities like the government and security agencies could also track the network participants if they had access to the public ledgers.