What Is Blockchain? and How does blockchain Works
how does blockchain work, A blockchain is a shared, distributed database used to electronically store data. It’s most popularly employed in cryptocurrency systems such as Bitcoin to reliably keep a secure and decentralized record of transactions. The incentive of the technology lies in its capability to authenticate and confirm data without the requirement for a third-party intermediary thus creating trust.
One key difference between a typical database and a blockchain is the way data is stored. Instead of being scattered throughout the system blockchain collects information into groups known as blocks. Each block is limited in size and, when filled it’s connected to the previously completed block so that a chain of data emerges namely blockchain. All new information must be included in a newly formed block which will be added to the ledger once full.
Blockchain, on the other hand, structures its data into chunks (blocks) that are strung together, as its name implies. A decentralized implementation of this data structure creates an irreversible timeline of data. Blocks are added to the chain with an exact timestamp when they are added to the chain. Each time a block is filled it is added to this timeline.
Principles To Keep In Mind
In contrast to a traditional database, a blockchain is a type of shared database that stores data in blocks connected by encryption.
New data is entered into a fresh block. Once the block is filled with data, it is chained onto the previous block, making the data chronologically arranged.
Blockchain can store a variety of information but so far they have mainly been used as transaction ledgers.
The blockchain is used in Bitcoin in a decentralized manner which means that no one person or group is in control rather all users are collectively in charge.
As blockchain it cannot be changed, the data deposited onto them is irreversible. This implies that all Bitcoin transactions are permanently recorded and available for public viewing.
How does blockchain work?
Digital information can be distributed and recorded via blockchain, but it cannot be modified. Therefore a blockchain serves as a basis for immutable ledgers or records of transactions that cannot be altered deleted or destroyed. Blockchains are also known as distributed ledger technologies (DLT) because of this.
A blockchain concept was first proposed in 1991 as a research project well before its first widespread application in 2009 Bitcoin With the development of various cryptocurrencies decentralized finance (DeFi) non-fungible tokens (NFTs) and smart contracts in recent years the use of blockchain has exploded.
Decentralization Of The Blockchain
This company is faced with a single point of failure the warehouse containing 10000 computers and the entire client account data. If this building were to experience an outage of electricity and Internet connection or worse destruction by fire or malicious intent the loss and potential corruption of data would be immense.
Blockchain technology allows data to be spread across multiple nodes, meaning it is not held in a single place. This creates redundancy in the system and adds an extra level of security, as any changes would need to be mirrored across all the other nodes.
If someone attempts to alter a record, the other nodes in the network will detect this and prevent any fraudulent activity from taking place. This provides accuracy and transparency to records and safeguards them from manipulation.
This makes cryptocurrency information and history irreversible (such as transactions). Blockchain can contain a wide range of information including legal contracts, state identifications and product inventories. The information could be a list of transactions (like with cryptocurrencies), but they can also store a variety of other items, including a company’s inventory of products.
It is necessary to have a majority of the computing power of the decentralized network agree to a new entry or record in a block in order for it to be validated. In order to prevent bad actors from validating bad transactions or double spending, blockchain are secured by consensus mechanisms like proof of work (POW) or proof of stake (PoS) Even when no single node is in charge, these mechanisms allow for agreement.
A Transparent Process
In Bitcoin’s decentralized blockchain, all transactions are transparently viewed by either having a personal node or using a blockchain explorer that allows anyone to view live transactions. When new blocks are confirmed and added, each node receives a copy of the chain, which means you can track Bitcoin wherever it goes if you want to.
Bitcoin exchanges have, for example, been hacked in the past, and those who kept Bitcoin on the exchange lost everything. Even if the hacker is entirely anonymous, the Bitcoins they extract are easily traceable. It would be known if the Bitcoins stolen in some of these hacks were transferred or spent somewhere.
Most Bitcoin blockchain records (as well as most others) are encrypted so only the owner of the record can decrypt it (using a public-private key pair) to reveal their identity. This allows users of blockchain to maintain transparency while remaining anonymous.
What is the security of blockchain?
Blockchain technology offers decentralized security and confidence due to its structure. Each block is stored in a linear, chronological sequence, with no ability to edit them retrospectively unless the majority of nodes have come to a consensus.
Each block contains a timestamp and a hash that is generated via a mathematical function that turns digital information into a string of numbers and letters. Any changes or revisions made to the data will result in an alteration of the respective hash code.
For example, let’s say that a hacker who is also running a node on a blockchain network wants to alter a blockchain so he can steal cryptocurrency. If they altered their copy it would no longer match everyone else’s copy. Those other copies would see this one copy stand out when cross-referenced and that hacker’s chain would be dismissed as being untrue.
In order to succeed with such a hack, the hacker must simultaneously control and alter 51% or more copies of the blockchain in order to make their new copy the majority copy, and therefore the agreed-upon chain.
In addition to requiring immense money and resources, such an attack would also require reworking all of the blocks as they would now have different timestamps and hash codes.
The sheer size of many cryptocurrency networks, and their rapid growth, make it all but impossible to carry out an attack. Furthermore, should someone be so bold as to try something like this, the entire network would recognize the changes to the chain and hard fork off into a new chain.
This means that the value of the attacked token would nosedive rendering the whole venture pointless since any control by a “bad actor” is worth nothing.
Moreover, even if they were to go after the new version of Bitcoin they’d still come up against the same consequences. It’s all structured in such a way that participating in the network is always more profitable than attacking it.