- How does a blockchain work
I’m sure most people have heard of the term ‘Blockchain’, but it still remains as one of those things where people don’t fully understand. So, here’s a simplified blockchain explainer:
- Blockchains are used as digital ledgers to record information/transactions and are open to anyone.
- They’re popular because of its fraud-proof design features making them super secure. Once information is stored, it’s very difficult to tamper or edit.
- Like the name itself suggests, try visualising a string of blocks, all linked to each other in a sequence, forming a chain.
- Individual blocks contain codes called data and hash.
- Data refers to the information that you wanna record. Eg. a Bitcoin Blockchain would store info of a BTC transaction (from whom, to whom, BTC amount).
- Hash means the identification code for each block. Each hash is unique, like a fingerprint.
- A block also contains the hash of its previous block in the sequence of the chain.
- Eg. Block 10 in a chain would store a transaction record, its own hash, and the hash of Block 9.
- Changing the data of a block changes its hash.
- Eg. if someone tries to tamper with the data in Block 10, B10’s hash changes and all subsequent blocks are invalid in the chain. B11’s hash of B10 no longer matches.
- Changing and adding a new block also takes time (ie. 10 minutes for BTC’s Proof of Work).
- Blockchains run on a peer-to-peer (P2P) network, where anyone and everyone is free to join.
- Everyone has a full copy of the blockchain, creating a consensus where matching blocks amongst each other means that it's valid.
- So, if someone tampers with a block, it will be checked against every other copy on the network and rejected as it’s not valid.
Again, this is a major simplification, but I hope it helps you understand the concept, as many systems would not be possible without blockchains and many more systems, besides cryptos, will be running on blockchain technology.