Blockchain Defined: What You Need to Know

Blockchain Defined: What You Need to Know

What is a blockchain?  How does it work?  What is its importance?


BLOCKCHAIN

What is blockchain?

    A blockchain, as the name suggests, is a collection of blocks that store data. In 1991 A team of researchers came up with the idea of a blockchain, and it was made in a way to timestamp digital documents so that they couldn't be backdated or edited, or falsified.

    In the year 2009, Toshi Nakamoto used this technology to create the digital money we all know as Bitcoin. This development helped to boost the popularity of this technology.

    A blockchain is a decentralized database that anybody at all can have access to. They have an intriguing feature. Any data that has been put on the blockchain cannot be changed or can be said to be highly impossible to change.

So, how does blockchain work? 

    Let's take a detailed look at one of the blocks. Each block contains some data as well as the block's hash and the hash of the preceding block. The kind of blockchain determines the data that will be available on the block. For example, the information about a transaction, such as a sender, receiver, and quantity of bitcoin sent is the type of data found in the bitcoin blockchain.

    A block's hash identifies both the block and its contents, just like how the biometric system works. And it is constantly different just like the biometric. When a block is formed, its hash is calculated; whenever there is any change in a block, the hash also changes. In other words, the hashes are very important in the detection of any block manipulations. If the data of a block changes, it is no more the same block. Each block's third element is the hash of the previous block. As a result, a chain of blocks is formed. This technology is the reason why the blockchain is so secured.

 

block chain

    Let's have a look at an example. We take the three-block chain into consideration blocks A, B, and C respectively. Each block consists of its hash, and also the hash of the previous block. As a result, block C points to block B, and block B points to block A. We call the first block [block A] the Genesis block based on the fact that it is unique, the first and cannot point back to the subsequent blocks. Let's imagine block B has been manipulated. As a result, the hash of the block is likewise altered, so also, block C and beyond will be altered and rendered incorrect, as they no longer store a valid hash of the previous block.  As a result, changing the data of one block affects all subsequent blocks.

    However, hashes alone are insufficient to prevent manipulation. You could effectively meddle with current computers since they are exceedingly fast and can calculate hundreds of thousands of hashes per second, to restore the validity of your blockchain, start with a block and recalculate all prior block hashes. Blockchains use a process called proof of work to combat this. It's a device that slows down the creation of new blocks. Calculating the required proof of work and adding a new block to the chain takes about 10 minutes as in the case of bitcoin. Trying to manipulate with the blocks is quite tough using this strategy. Because changing one block will force you to recalculate the proof of work for all subsequent blocks.

 

    As a result, applying hashing and proof of work mechanisms is what heightens the security of blockchain technology. Blockchains, on the other hand, make themselves safe in another way: they're distributed. Rather than entrusting the chain's management to a single business. Blockchains are built on a peer-to-peer network in which everyone may participate.  Everyone who joins this network gets a full copy of the blockchain.

    The node uses this to ensure that everything is normal and is working as it should. Let's have a look at what happens when someone makes a new block. Everyone on the network receives that block. The node verifies each block to guarantee and ensure it hasn't been manipulated. If everything checks out, each node uploads the block to its blockchain. This network's nodes come together to form a consensus. They've decided which blocks are legitimate and which aren't. Blocks that have been tampered with will be rejected by other nodes in the network. In other words, you must work on the entire chains block in other to manipulate it, which is very difficult / almost difficult to accomplish.

What is its importance?

Blockchains are likewise in a perpetual state of evolution.

·        One of the latest developments in the development of smart contracts. These contracts are simple scripts that are stored on the blockchain and may be used to automatically swap currency based on specific criteria.

  Many individuals were intrigued by the emergence of blockchain technology.

·        Other sectors immediately recognize that this technology may be used for several things, like storing medical records, creating a digital notary, and even collecting taxes.

 So now you know what a blockchain is, how it works, and what problems it answers on a fundamental level.

DailyTech

A financial enthusiast, with a vast knowledge in Financial technology, cryptocurrency and personal finance .

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