When the term blockchain started making headlines and bitcoin (BTC) was first launched, not many people understood how blockchain technology worked. However, that may have changed today; After launching several more crypto coins and now with the appearance of NFTs and their many practical applications, the general public is becoming more familiarized with the technology. In case you are not up to date, we have prepared a short guide to review some basic blockchain concepts. How are the transactions recorded? what are the main properties of blockchains? What about distribution and decentralization?. Continue reading to know more about blockchain.
A bit of blockchain history
The original idea behind blockchain was thought of In 1991. The intention was to use blockchain as a way to timestamp digital documents so that no one could tamper with them. Around 2009, it was adopted by the famous ‘Satoshi Nakamoto’ to create the first-ever crypto coin called Bitcoin (BTC).
What is a blockchain exactly?
Just like the name describes a blockchain is a chain of blocks that contains bits of information. The blocks work as a distributed and decentralized ledger of transactions that is completely open to anyone. Each block has important properties that make the chain work as it does. Once a transaction is recorded in a block, it becomes really difficult to change it. Also, the words decentralized and distributed are of key importance. Let’s explain!
A block has three main properties, the data stored in the block, the hash of the block, and the hash of the previous block. You can think of hash as a digital fingerprint of a block that is made of an encrypted string on letters and numbers of a fixed length. The hash is always unique and identifies a particular block. The hash of the previous block is used to point to other blocks thus creating a chain of blocks. Using hashes to build a blockchain makes it secure. If for some reason, the has of a block is changed, it makes all the following blocks invalid because they no longer point to a valid hash, the hash of the previous block.
A blockchain Proof-of-Work
There are other mechanisms that work to make blockchain secure. As we said, blockchains are open to anyone, and it is possible for anyone to create new blocks; However, the process to create new blocks is slow and steady and requires ‘proof of work’. This is where the so-called miners come into play. It takes an X amount of time to make the required calculations to add a new block to the chain. If a single block is tampered with, the proof of work needs to be calculated again to make the blockchain valid.
A Distributed and Decentralized Ledger
Blockchain security goes even further by being distributed and decentralized; instead of depending on a centralized entity to manage the chain, blockchains use a Peer to Peer Network (P2P) without a central point of exchange. The interconnected devices or nodes that join the network share the information and get a full copy of the chain making it distributed across all nodes. Each node can use this to verify the validity of the chain.
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