Beginner’s Guide to Understanding How Blockchain Works

 

In this piece of article you will learn the basic and understand what is blockchain and how the blockchain work and also what problems they do solves and how can they be used on the basic level

What is a blockchain?

A blockchain is just a chain of blocks that used to store some information. A blockchain is a distributed ledger that is open to anyone completely. But the blockchain has its unique properties that make it so interesting to many people. Once the data/information has been recorded inside a blockchain, it very difficult to change it or manipulated.

This technique was first originally described in 1991 by a group of researchers and was originally intended to timestamp digital documents so that it’s not possible to backdate them or to tamper with them. Then in 2009 this technique was implemented by Satoshi Nakamoto to create bitcoin, digital currency “cryptocurrency.”

How does Blockchain work?

For simple explanation Well, let’s say you have a blocks, and each block contains some data, the hash of the block and the hash of the previous block. And the data that is stored inside each block depends on the type of blockchain.

Let say one of the block is the Bitcoin blockchain for example its stores the details about a transaction in, such as the sender, receiver and amount of coins.

A block also has a hash. That you can compare a hash to a fingerprint. It identifies a block and all of its contents and it's always unique, just as a fingerprint. Once a block is created, its hash is being calculated.

If you wish to change something inside the block will cause the hash to change. So in other words: hashes are very useful when you want to detect changes to blocks. If the fingerprint of a block changes, it no longer is the same block, it’s created a new.

Another important element inside each block is the hash of the previous block.

This effectively creates a chain of blocks and it’s this technique that makes a blockchain so secure.

Example: Let say we have a chain of 3 blocks, and each block has a hash and the hash of the previous block. So block number 3 points to block number 2 and number 2 points to number 1.

Now the first block is a bit special, it cannot point to previous blocks because it's the

First one. We call this the genesis block. If let's say that you tamper with the second block.

This causes the hash of the block to change as well. In turn that will make block 3 and all following blocks invalid because they no longer store a valid hash of the previous block.

So changing a single block will make all following blocks invalid. But using hashes is not enough to prevent tampering.

Computers these days are very fast and can calculate hundreds of thousands of hashes per second. You could effectively tamper with a block and recalculate all the hashes of other blocks to make your block chain valid again.

So to mitigate this, blockchains have something called proof-of-work. It's a mechanism that slows down the creation of new blocks.

In the case of Bitcoins, it takes about 10 minutes to calculate the required proof-of-work and

Add a new block to the chain. This mechanism makes it very hard to tamper with the blocks, because if you tamper with 1 block, you'll need to recalculate the proof-of-work for all the following blocks.

So the security of a blockchain comes from its creative use of hashing and the proof-of-work

Mechanism.  But there is one more way that blockchains secure themselves and that's by being distributed.

Instead of using a central entity to manage the chain, blockchains use a peer-to-peer network and anyone is allowed to join. When someone joins this network, he gets the full copy of the blockchain. The node can use this to verify that everything is still in order.

Another example let's see what happens when someone creates a new block.

That new block is send to everyone on the network. And each node then verifies the block to make sure that it hasn't been tampered with. If everything checks out, each node adds this block to their own blockchain. All the nodes in this network create consensus.

They agree about what blocks are valid and which aren't. Blocks that are tampered with will be rejected by other nodes in the network.

So to successfully tamper with a blockchain you'll need to tamper with all blocks on the

Chain, redo the proof-of-work for each block and take control of more than 50% of the peer-to-peer network. Only then will your tampered block become accepted by everyone else.

This is almost impossible to do!

Blockchains are also constantly evolving. One of the more recent developments is the creation of smart contracts. These contracts are simple programs that are stored on the blockchain and can be used to automatically exchange coins based on certain conditions.

The creation of blockchain technology peaked a lot of people’s interest.

Soon, others realized that the technology could be used for other things like storing Medical records, creating a digital notary or even collecting taxes and many more.

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