If you are pro-crypto or even a beginner in the crypto world, you surely must have heard the word Blockchain.
Most people shut their minds off as soon as they hear Blockchain. It’s a misunderstanding among the majority that Blockchain is quite technical and difficult to grasp for a non-tech.
However, Blockchain is a very simple concept. It was created in 1998 to timestamp digital documents. The aim was to make it impossible to backdate the digital documents.
Blockchain remained a hidden treasure until 2009 when Satoshi used it to create the first cryptocurrency, Bitcoin.
Now Blockchain is slowly finding its implications in various other sectors as well. Companies like Walmart, AIG, Pfizer, Siemens, Uniliver and many others. IBM has developed a Food Trust Blockchain to track the journey of the food products from the factories to their destined locations.
With the increasing adaption of Blockchain, it has become important more than ever to learn about Blockchain.
Today we will translate Blockchain into simple English for you.
What is blockchain?
Blockchain is a type of database that stores data in blocks that are chained in chronological order. Blockchain is accessible to everyone and anyone. It can be used to store any type of data.
In the case of Bitcoin, Blockchain is used to record all the Bitcoin transactions in a transparent and decentralized way. This ensures that no single person or a group has control over it. Rather all the users exercise the control.
Take the blockchain network as a network of brick blocks that contain some data. In the case of cryptocurrency, Blockchain stores the data of the senders and receivers’ private keys and amounts.
Blockchain stores data in groups called Blocks. When one block is filled, it is chained to its previous block. While a new block is mined which continues to store the data.
There are three elements of a block:
- Hash of the previous block
Hash is the unique id or the fingerprint of a block. Once a block is created its hash starts to get calculated. Any changes to the block simultaneously change the hash.
The block also stores the hash of its immediate previous block. This is how the blocks are chained together in chronological order.
Hashes also ensure the security of the blockchain network. To understand let’s take an example:
There are two blocks: Block A and Block B
Block A is the genesis Block which means it is the first block of the Blockchain network. Block B follows after Block A, which stores some data, its own hash and the hash of Block A.
Now if someone alters the data of Block A, its hash will also change. Moreover, this new hash of Block A will not match the originally recorded hash of Block A in Block B. This is where the real mechanism comes into being.
The computer quickly calculates and matches the new altered hash of Block A with all the blocks and hashes. When it finds an error, it automatically corrects itself. Thus preventing data altercation or hacking.
In Bitcoin Blockchain, every computer or group of computers are connected forming a network. These computers are controlled by different persons worldwide. These are also called nodes.
When a Bitcoin transaction is processed, it is transmitted to a peer-to-peer network of computers spread all over the world. This network of computers then validates and verifies the transaction.
Once it is confirmed it gets stored on the blocks which are continuously recording all the transactions. The transactions form a long history of legitimate transactions which are arranged in chronological order. Finally, the Bitcoin transaction is complete.
HOW IS BLOCKCHAIN DECENTRALIZED AND SECURE?
Bitcoin uses a network of computers across the globe to store its Blockchain. Unlike other databases, the Bitcoin Blockchain network of computers is not under one roof. No single person, group or institution has authority over it.
As mentioned above these are operated by different individuals who are in different geographical locations. These computers are called nodes. Through this model the Bitcoin Blockchain is decentralized.
Moreover, anyone with access to personal nodes or Bitcoin explorers can view the live transactions occurring. However, only the private keys are visible. There is no way to identify the person with a private key.
This makes the Bitcoin network transparent as well as anonymous.
The Bitcoin Blockchain network is secure as the nodes cross-refer to each other in case of any change in the data. If there is an error in the data of one node, it will refer to other nodes to correct itself.
Therefore, no one can hack or alter the data of a single node making the whole system secure and immutable.
All these properties and structure of the Bitcoin Blockchain makes it decentralized, transparent, secure and irreversible.