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What is blockchain?

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What is blockchain| how blockchain works | Blockchain full explanation

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Beginner

A blockchain is essentially a digital, continuously expanding list of data recordings. Such a list consists of numerous data blocks,

They are arranged in time order, connected, and protected by cryptographic proofs.

The original blockchain may be traced back to the early 1990s when physicist W. Scott Stornetta and research scientist Stuart Haber used a chain of blocks to use cryptographic techniques to secure digital documents against data theft.

Hal Finney, Dave Bayer, and others were undoubtedly influenced by the work of Haber and Stornetta.

and numerous other experts in computer science and cryptography, which finally resulted in the development of Bitcoin, the first decentralized electronic payment system (or simply the first cryptocurrency).

In 2008, the Bitcoin whitepaper was released under the alias Satoshi Nakamoto.

Blockchain technology is primarily used to track cryptocurrency transactions, but it can also be used to store many other types of digital data and for a variety of other purposes.

Bitcoin, which was created with a careful and balanced combination of cryptography and game theory, is the oldest, safest, and largest blockchain network.

How does blockchain work?

A blockchain is a stable chain of blocks that each contains a list of previously confirmed transactions when referring to cryptocurrencies.

The blockchain network serves as a decentralized database because it is maintained by numerous computers located all over the world.

This implies that each participant (node) keeps a copy of the blockchain data and interacts with other participants to make sure that everyone is aware of the same information.

Because blockchain transactions take place within a peer-to-peer global network, Bitcoin is a decentralized, censorship-resistant, and borderless digital currency.

Additionally, because they don’t necessitate any sort of confidence, the majority of blockchain systems are regarded as being trustless. Bitcoin is not governed by a single entity.

The mining process, which uses hashing algorithms, is a crucial component of practically every blockchain.

The SHA 256 algorithm is used by Bitcoin (Secure hash algorithm 256 bits). It generates an output that always has the same length from an input of any length.

The result is known as a “hash,” which in this case is always made up of 64 characters.

No matter how often the procedure is carried out, the same input will always yield the same outcome. But if the input is slightly altered,

The outcome will completely alter. 

As a result, hash functions are deterministic, and the majority of them in the realm of cryptocurrencies are made to be one-way hash functions.

Because it is a one-way function, it is nearly impossible to determine the input from the output.

The input can only be speculated, but the likelihood of getting it correctly is really slim. 

This is one of the factors that makes the blockchain of Bitcoin secure.

Let’s use a straightforward example of a transaction to show how a blockchain operates now that we are aware of what the algorithm performs.

Imagine that Alice, Bob, and their Bitcoin balance are all present.  Let’s say Bob has a 2-Bitcoin debt to Alice.

Despite being older than Bitcoin, blockchain technology serves as a decentralized, central registry for most cryptocurrency networks.

Alice broadcasts a message with the transaction she wants to make to all the network’s miners in order to send Bob that 2 bitcoin.

Alice provides Bob’s address and the desired quantity of Bitcoins to the miners during that transaction.

coupled with her public key and digital signature. 

The miners can verify that Alice is indeed the rightful owner of those coins because the signature was created using her private key.

KEY TAKEAWAYS

  • blockchain is a particular kind of shared database that varies from other databases in that it saves data in blocks that are subsequently connected via cryptography.
  • A new block is created as each new piece of data arrives. The data are chained together in chronological sequence once the block has been filled with information and is attached to the block before it.
  • Although other kinds of information can be maintained on a blockchain, a transaction ledger has so far been its most popular use.
  • Blockchain is utilized in the context of Bitcoin in a decentralized manner, ensuring that no one user or group has control but rather that all users collectively maintain control.
  • Since decentralized blockchains are immutable, the data entered into them cannot be changed. This implies that transactions made using Bitcoin are publicly visible and permanently recorded.

Transaction Process

Attributes of Cryptocurrency

Decentralization of the blockchain

Consider a business with a server farm of 10,000 machines that it uses to keep a database with all of its clients’ account information.

But this creates a single point of failure. What would happen if the electricity at that place failed? What if the computer’s Internet connection is lost? What if it completely burns down?

What happens if a malicious person deletes everything with a single keypress? The information is either missing or damaged.

This not only adds redundancy but also preserves the accuracy of the data stored there; if someone attempts to change a record at one instance of the database, the database will still be clean.

The other nodes wouldn’t be changed, preventing a malicious actor from doing so. If one person modifies Bitcoin’s transaction history,

The node with the wrong information would be easily identified by cross-referencing all other nodes.

This approach aids in creating a clear and precise sequence of events. This prevents any one node in the network from changing the data it contains.

As a result, the data and history (such as those of cryptocurrency transactions) are irreversible.

A blockchain may store a variety of data, including legal contracts, state identifications, or a company’s goods inventory. Such a record may be a list of transactions (such as with a cryptocurrency).

Important Note : A majority of the decentralised network's computer power would need to concur in order to validate new records or entries to a block. Blockchains are safeguarded by a consensus technique like proof of work (PoW) or proof of stake to stop malicious parties from confirming incorrect transactions or multiple spends (PoS). Even in cases when no single node is in charge, these procedures still enable consensus.

Due to the decentralized structure of the Bitcoin blockchain, all transactions may be transparently observed by utilizing blockchain explorers, which enable anybody to examine transactions as they happen in real time, or by owning a personal node. As new blocks are added and confirmed, each node’s copy of the chain is updated. This implies that you might follow Bitcoin wherever it went if you so desired.

As an illustration, exchanges have previously been hacked, and anyone who had Bitcoin stored there lost everything. The stolen Bitcoins are clearly identifiable, despite the hacker’s complete anonymity. It would be known if the Bitcoins taken in some of these attacks were relocated or used somewhere.

Naturally, the data kept on the Bitcoin blockchain (as well as the majority of others) is encrypted. This implies that only the record’s owner will be able to decode the file and expose its identity (using a public-private key pair). As a result, blockchain users can maintain their anonymity while maintaining transparency.

Sources of blockchain

Decentralized security and trust are made possible by blockchain technology in a number of ways. To start, new blocks are always chronologically and linearly stored. In other words, they are constantly added to the blockchain’s “end.”

It is very difficult to go back and change the contents of a block once it has been added to the blockchain unless a majority of the network has agreed to do so.

This is due to the fact that each block has its own hash, as well as the hash of the block that came before it and the aforementioned date.

Imagine a hacker who also manages a node on a blockchain network wanting to change a blockchain and take everyone else’s cryptocurrency. 

If they were to change the one copy they have, It would no longer line up with the copies of everyone else. 

When everyone compares their copies to one another, they will notice that this one copy stands out, and the hacker’s version of the chain will be rejected as fraudulent.

For such a hack to be successful, the hacker would need to simultaneously control and change at least 51% of the blockchain copies so that their new copy becomes the majority copy and,

Hence, the established chain. The requirement to rewrite every block because their timestamps and hash codes had changed would make such an attack extremely expensive and resource-intensive.

As network participants would observe such significant changes to the blockchain, doing such a thing would not go unnoticed.

The network’s users would then abruptly switch to an unaffected version of the chain. 

As a result, the token version that was attacked would lose value, rendering the attack ultimately useless because the malicious party would then be in control of a worthless asset.

The same thing would happen if the malicious party targeted Bitcoin’s most recent fork. As a result, participating in the network is much more economically advantageous than attacking it.

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What is blockchain?

A blockchain is essentially a digital, continuously expanding list of data recordings. Such a list consists of numerous data blocks, They are arranged in time order, connected, and protected by cryptographic proofs

How does it work?

A blockchain is a stable chain of blocks that each contains a list of previously confirmed transactions when referring to cryptocurrencies.

Benefits of Blockchains

Transactions on the blockchain network are approved by a network of thousands of computers. This removes almost all human involvement in the verification process, resulting in less human error and an accurate record of information. Even if a computer on the network were to make a computational mistake, the error would only be made to one copy of the blockchain.

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