Blockchain 101 | What Is Blockchain?
While many have some clue about what Blockchain is, but can’t explain it very well. So watch, to understand better about Blockchain and how does it work?
Blockchain Explained
Blockchain is a chain of blocks; it is a ledger; it is a technology; it is a system; blockchain is a distributed ledger technology (DLT) – which one is it? Well, it is all of this and some more. Blockchain is an immutable ledger that stores transactions and digital assets data across the globe on thousands of servers which is difficult or impossible to change, hack, or cheat the system.
It is called a Blockchain because it is a growing list of records which are referred to as ‘Blocks’. These data blocks get stacked in chronological order and connect to form ‘chains’. Thus, the terms ‘Blockchain’. The ledger only gets updated with mutual consensus in the system. The data is entered, can never be erased. One of the reasons it has become so popular is because it works as an alternative to our traditional centralized systems like banking and financial system. Nonetheless, Blockchains application is not limited to cryptocurrencies; there are many applications for blockchain in other sectors too. You can watch about it here:
Characteristics of Blockchain –
1. The Digital assets on Blockchain are distributed as a substitute for copying or transferring
2. The asset is decentralized, thus permitting real-time access.
3. A ledger that is transparent showcasing all the changes maintain the integrity of the document, which in turn forms trust in the asset.
Blockchain consists of three concepts – blocks, miners, and nodes.
Blocks – Each chain has multiple blocks and each of these blocks have three elements
∙ Data
∙ Nonce – It is a 32-bit number that is generated when the block is created.
∙ Hash – It is a 256-bit number attached to the nonce and starts with many zeroes.
A nonce generates a cryptographic hash when the first block in the chain is created. All the data that is in the block is signed and connected to this nonce and hash.
Miners
Mining is the process of creating new blocks on the chain and it is done by Miners. Every block in the blockchain not only has a matchless nonce and hash but references the hash of the previous block in the chain. Thus, in large chains, it is quite difficult to mine a block.
A special software is used by miners to solve this intricate math challenge. Since the nonce is only 32-bits and the hash is 256, it makes about four billion combinations for nonce-hash that must be mined to find the correct one. When they do land on the correct combination it is called the golden nonce and gets added to the chain.
One of the main reasons, why it is not easy to manipulate blockchain, is due to the whole process of mining. If you want to make a change to any previous block it needs to go through re-mining of the block with the change and all the blocks after that. It takes a lot of time and computing power to find a golden nonce. Once the block is found and the change has been accepted by all the nodes on the network, the miner gets paid.
Nodes
Another crucial aspect of blockchain technology is decentralization. Nodes are any electronic device that keeps copies of blockchain and keeps the networking going. Thus, there is no computer or company that keeps chains. It is a distributed ledger across devices that connect the chain.
While each node owns a copy of the blockchain, the network must algorithmically approve, trust, and verify any changes to the mined block. As blockchains are transparent, all the actions can be checked in the ledger. Transactions are identified by a unique alphanumeric identification number given to participants. Thus, Blockchains maintain the integrity and create trust via technology.