You have consistently heard about blockchain technology in the past few years, mostly from every face. Well, probably you are hearing terms like cryptocurrencies and bitcoin, as a matter of fact, that you may be inquisitive to know what is blockchain? And how does blockchain work?
As blockchain is continuously growing and becoming more and more user-friendly, it becomes crucial to learn about blockchain technology. If you are new to this world, then you are on the right article as we are going to answer what is blockchain and how does blockchain work?
Blockchain is known as distributed ledger technology (DLT). It is unalterable and transparent that is used in the form of decentralized and cryptographic hashing. It is a digital ledger of transactions that can be distributed and duplicated across the whole network of computer systems, and each time when a new transaction occurs on the blockchain, it is recorded in every participant’s ledger. Also, it’s impossible to hack, change and cheat.
Let’s understand blockchain technology using a simple analogy of Google Docs. When you create a doc or file on Google doc and share it with your group, the file is distributed rather than copied or transferred, this is known as a decentralized distribution chain that provides access to everyone at the same time, no one will await from change, with that all modifications are recorded, and changes are completely transparent.
Although blockchain is more technical than a Google doc, this comparison is more relatable. So, now that you know what blockchain is and how it works, let’s talk about how it works.
The entire blockchain consists of three main concept blocks, nodes and miners. To understand more precisely, let me define this term in-depth.
Each chain dwell on multiple blocks, and every block have three basic elements:
The process is like the first block of chain created at the same nonce generating the cryptographic hash. The data is considered signed and also forever tied to hash and nonce except it is mined.
The way of doing things by which miners add new blocks to the chain is called mining.
Each block in the blockchain has its own nonce and hash, but it also references the hash of the previous block in the chain, which makes block mining a challenge, especially in a large chains.
Miners use (made to do one thing very well) software to solve mathematical problems that use random numbers to create proper hashes. The reason is that hashes are 256 bits long, while random numbers are only 32 bits long. You need to mine about 4 billion nonce hash merges before you find the right one. When this happens, miners are said to have discovered the “golden nonce” and their block is added to the chain.
In blockchain technology, decentralization is the most important concept. No organization or computer owns the chain. Rather, it distributes the ledger with nodes that are connected to the chain. Nodes are kind of electronic devices that maintain copies in the blockchain and function in the network as well.
Each node occupied its own copy of the blockchain, with that network algorithmically approving the new mined blockchain to be trusted, verified, and updated. Blockchain is transparent, and each activity can be easily viewed and checked in the ledger. Moreover, every respondent is occupied with an alphanumeric identification number that reflects their transactions.
So, these are the entire three blockchains on which the blockchain works. In addition, there are also two types of blockchain that are known as a public blockchain and private blockchain.
In a public blockchain, any individual can participate as they can write, read and audit the data on a blockchain. It was noticed that it was arduous to alter transactions that were logged in the public blockchain with no specific control authority on nodes. There are some examples of public blockchains such as Ethereum, bitcoin, and litecoin.
In a private blockchain, it is controlled by a group and organization, it gives a chance to decide who is invited to the system, and it has the authority to alter or go back to the blockchain. This blockchain was the same as in-house data storage as it spread numerous nodes that increase security.
In recent times, blockchain has become a niche in technology. It will be unpredictable in the next 5 to 10 years, but it will significantly change the ways to transact and interact in the future.
In addition, blockchain technology has enough potential to change the way of living. It works as similar to potential public internet protocols such as HTML as right now it was in its initial stage of the world wide web.